If you’re a stock trader or investor who had a tough year in the market, you can use your losses to save on taxes later. Here’s what you need to know about carrying forward short-term capital losses (STCL) from Financial Year 2024-2025 (FY25).
The most crucial step is to file your Income Tax Return (ITR) correctly and on time.
Key Information for ITR-2 Filing
If you are a salaried person or an investor with gains or losses from stocks and mutual funds, you must file ITR-2.
- File on Time: The deadline to file your ITR for FY25 is September 15, 2025. You must file by this date to carry forward any losses. If you miss the deadline, you lose the ability to use those losses in the future.
- What You Can Do: You can use your STCL to offset any capital gains you have. These losses can be adjusted against both short-term capital gains (STCG) and long-term capital gains (LTCG).
- Carry Forward: If your losses are greater than your capital gains for the year, you can carry the remaining losses forward for up to eight years. This allows you to set them off against future capital gains, which can significantly reduce your tax bill in the coming years.
Step-by-Step Guide to Filing Your ITR-2
- Gather Your Documents: Before you start, get your hands on your broker’s statements and your capital gains report. This will show you exactly what your gains and losses are.
- Go to the Right Section: While filling out the ITR-2 form, go to the “Capital Gains” section.
- Enter Your Data: Accurately enter your gains and losses. If you have profits, the system will automatically use your losses to offset them.
- The Carry-Forward Process: Any losses that are left over will automatically be moved to the “Carry Forward” section of your ITR. The tax system handles this part for you, ensuring the losses are properly recorded for future use.
By following these steps and filing on time, you can turn a losing year into a future tax-saving opportunity.