ITR-2 filing: How to carry forward short-term capital loss of FY 2024-2025?

If you are an investor who has incurred a short-term capital loss in the financial year (FY) 2024-25, you might be wondering how to carry it forward. Filing your Income Tax Return (ITR) is a crucial step to ensure you can offset these losses against future capital gains.

"Short-term capital loss suffered in the current financial year can be adjusted against both short term and long term capital gains of the same year," said CA Gaurav Singh Parmar, Associate Director, Fincorpit Consulting.

In case the set off of loss is not possible in the current year, the unadjusted portion of short-term capital loss can be carried forward to up to eight consecutive Assessment years, provided you file your ITR-2 on or before the due date. This process allows you to effectively reduce your future tax liability on capital gains.

"If taxpayers are not able to set off their entire short-term capital loss with capital gains in the current year, they can carry forward the remaining losses to the next 8 assessment years. These carried forward losses can be set off against short-term as well as long-term capital gains in future years up to 8 years or until they are fully set off, whichever is earlier," said Abhishek Soni, CEO & Co-founder of Tax2win.

For the filing of short-term capital loss in ITR-2, it should be reflected carefully under the "Carry Forward Losses" schedule. The loss can only be set off against the future capital gains and not against the income of other heads, such as salary or business, explained CA Gaurav Singh Parmar.

⦁ Use ITR-2 if you have capital gains/losses, even if you don’t have business income.

⦁ Go to the "Capital Gains" schedule in the ITR-2 form.

⦁ Under "Schedule CFL" (Carry Forward of Losses), enter the short-term capital loss amount under the relevant assessment year (AY 2025–26 for FY 2024–25).

As per Section 139(3) of the Income Tax Act, the loss cannot be carried forward if the return is filed after the due date.

After filing your returns, don’t forget to e-verify your ITR. E-verification is essential for the Income Tax Department to begin processing your return and issue any applicable refunds.