Capital gains netting India explained simply — set off losses across equity, gold, property & mutual funds correctly in your FY 2025-26 ITR-2.
Sold shares, gold, a flat, and a mutual fund in the same year, and now you're looking at a mix of profits and losses? You don't pay tax on each sale by itself. The law makes you net them first, and the order you do this in matters more than most people realise.
Here's the short version: a short-term loss can reduce almost any gain, but a long-term loss can only reduce a long-term gain. Get that backwards and you'll either pay more tax than you owe, or end up explaining an AIS mismatch later. This guide walks through capital gains netting in India step by step, for FY 2025-26.
Capital gains netting is the rule that says: add up your gains and losses across every asset you sold this year before you work out the tax. Sold equity, gold, and a house in the same year? You don't total them separately — you net them, under Sections 70, 71, and 74 of the Income-tax Act, 1961.
Why the 1961 Act and not the newer one? Because your sales happened in FY 2025-26, which is assessed as AY 2026-27, and this remains the last filing season governed entirely by the old framework. The Income-tax Act, 2025 only takes over income earned from 1 April 2026 onward. So for this year's return, none of the new section numbers apply — you're still working with the 1961 Act.
Applies To | Does NOT Apply To |
|---|---|
Anyone who sold two or more capital assets (equity, gold, property, debt funds, crypto) in FY 2025-26 with a mix of gains and losses | Someone with a gain in just one asset class and nothing to set off against it |
Salaried employees, freelancers, and NRIs filing ITR-2 for capital gains | Traders whose shares are treated as business stock — that's business income, not a capital gain |
Anyone carrying forward a capital loss from an earlier year | Companies and firms — the 20%-with-indexation choice on property under Section 112 is only for resident individuals and HUFs |
One case worth flagging on its own: if crypto or an NFT is part of your portfolio, it sits completely outside this netting exercise. More on that just below.
Here's the sequence the Act actually follows, in three steps.
Step 1 — Net within each head. Add every short-term gain and loss into one figure: your Net STCG. Do the same for every long-term item to get your Net LTCG.
Step 2 — Set off across heads. A short-term capital loss (STCL) is generous — it can reduce both short-term and long-term gains, under Section 70(2). A long-term capital loss (LTCL) is stricter: it can only reduce a long-term gain, never a short-term one.
Step 3 — Carry forward what's left. Anything still unabsorbed carries forward for 8 assessment years under Section 74(2) — but only if you filed your ITR by the due date. For ITR-2 filers, that's 31 July 2026 for FY 2025-26, per Section 80 read with Section 139(1). Miss that date and the loss is gone. Not delayed — gone.
This is the backbone of every capital gains set-off decision you'll make for FY 2025-26, whatever asset class you're dealing with.
The rates you're actually netting against:
Asset | Holding period for long-term | Short-term rate | Long-term rate |
|---|---|---|---|
Listed equity / equity mutual funds | 12 months | 20% (Section 111A) | 12.5% above ₹1.25 lakh a year (Section 112A) |
Physical gold | 24 months | Your income slab rate | 12.5%, no indexation (Section 112) |
Gold or Silver ETFs (listed) | 12 months | Your income slab rate | 12.5%, no indexation (Section 112) |
Property (immovable) | 24 months | Your income slab rate | 12.5% with no indexation, or 20% with indexation if bought before 23 July 2024 — you pick whichever works out lower |
Debt or specified mutual funds bought on or after 1 April 2023 | Not applicable | Slab rate, regardless of how long you held it (Section 50AA) | Not applicable |
Debt mutual funds bought before 1 April 2023 | 24 months | Slab rate | 12.5%, no indexation |
Two dates drive almost everything in that table. 23 July 2024 is when equity STCG moved from 15% to 20%, equity LTCG moved from 10% to 12.5%, and indexation disappeared for most other assets. The Cost Inflation Index for FY 2025-26 has been set at 376 by the CBDT under Notification No. 70/2025, dated 1 July 2025, which applies from AY 2026-27 onward. 1 April 2023 is the second key date — when debt mutual funds lost their long-term status for anything bought after that point. If you sold equity both before and after 23 July 2024, work out each period separately using its own rate, then combine the totals when you net. Don't average the two rates — that isn't how the calculation works.
The crypto exception you need to know (Section 115BBH): virtual digital assets sit entirely outside Sections 70 to 74. A loss on one coin can't touch a gain on another coin, and it certainly can't reduce your equity or property gains. It can't even be carried forward — it simply disappears. This single rule catches out more investors than anything else in a mixed portfolio, because everywhere else in the Act, a loss is worth something.
Example 1 — the common case: Ramesh, a salaried investor. In FY 2025-26, Ramesh sold equity shares he'd held for 8 months at a loss of ₹1,20,000, an equity mutual fund held for 18 months for a gain of ₹2,80,000, and a debt fund bought after April 2023 — which counts as short-term regardless of how long he held it — for a gain of ₹40,000.
Net STCG = −₹1,20,000 + ₹40,000 = −₹80,000 (a short-term loss)
Net LTCG = ₹2,80,000 (the equity mutual fund, nothing else)
Setting off: the ₹80,000 short-term loss reduces the long-term gain → ₹2,80,000 − ₹80,000 = ₹2,00,000
Apply the ₹1.25 lakh exemption under Section 112A: ₹2,00,000 − ₹1,25,000 = ₹75,000 stays taxable
Tax at 12.5% = ₹9,375; cess at 4% = ₹375. Ramesh owes ₹9,750
Example 2 — the trickier case most guides skip: Farida, a freelancer with a spread-out portfolio. Farida sold an equity mutual fund at a short-term loss of ₹1,80,000, listed equity shares (long-term) at a gain of ₹3,50,000, physical gold held for 30 months (long-term) at a loss of ₹90,000, a plot of land (long-term) at a gain of ₹9,00,000, and — separately — some Dogecoin at a loss of ₹50,000 alongside Ethereum at a gain of ₹1,20,000.
Net STCG = −₹1,80,000
Net LTCG, non-equity (Section 112) = ₹9,00,000 − ₹90,000 = ₹8,10,000
Net LTCG, equity (Section 112A) = ₹3,50,000
Set-off: it makes sense to apply the ₹1,80,000 short-term loss against the non-equity long-term gain first, since the equity gain already carries its own ₹1.25 lakh exemption that would otherwise go to waste. Non-equity gain drops to ₹8,10,000 − ₹1,80,000 = ₹6,30,000. The equity gain stays untouched at ₹3,50,000.
Equity (112A) tax: (₹3,50,000 − ₹1,25,000) × 12.5% = ₹28,125, plus ₹1,125 cess = ₹29,250
Non-equity (112) tax at 12.5%: ₹6,30,000 × 12.5% = ₹78,750, plus ₹3,150 cess = ₹81,900
Crypto: that ₹50,000 Dogecoin loss can't touch the Ethereum gain, no matter what. Tax on ₹1,20,000 at 30% = ₹36,000, plus ₹1,440 cess = ₹37,440
Farida's total tax bill: ₹29,250 + ₹81,900 + ₹37,440 = ₹1,48,590
One honest caveat here: the exact order the ITR-2 online utility follows when a short-term loss has to be split between equity (112A) and non-equity (112) long-term gains isn't spelled out anywhere in the bare Act. It only says a short-term loss can be set off against "capital gains" in general. The approach above is the commonly recommended, tax-efficient way to do it — but it's worth checking your own entry sequence with a CA before you file, or confirming it against the Income Tax Department's set-off and carry-forward guidance.
There's no single "netting" box to tick on the form. The ITR-2 portal spreads the process across three linked schedules.
Schedule CG comes first. Every sale goes under its own row: A1 for equity or equity mutual fund STCG (Section 111A), A2 for other STCG like property, gold, or debt funds at slab rate, B1 for equity LTCG (Section 112A, entered scrip-wise through Schedule 112A), B2 for other LTCG under Section 112 with no indexation, and B3 if you're choosing the 20%-with-indexation route on property bought before 23 July 2024.
Schedule CYLA takes over next. Once every row in Schedule CG is filled correctly, the portal applies the current year's set-off automatically.
Schedule BFLA handles anything brought forward from an earlier year, following the same logic — a short-term loss against both, a long-term loss against long-term gains only.
Schedule CFL is where whatever's still unabsorbed after CYLA and BFLA lands, becoming your carry-forward balance for the next 8 assessment years.
Here's the trap: enter an equity long-term gain under B2 instead of B1, and you quietly lose your ₹1.25 lakh exemption. The portal won't flag this for you — it just computes a higher tax. A multi-asset capital gains netting calculator built around Sections 70, 71, and 74 catches this before you ever open the ITR form.
You put a loss in the wrong bucket and the tax comes out higher than expected. Go back through Schedule CG row by row. The portal enforces the long-term-loss-against-long-term-gain rule strictly, so any mismatch in your own working sheet won't line up with what it computes. Fix the classification, not the final number.
You filed a belated return and lost your carry-forward. This one stings because it's permanent. A return filed after the Section 139(1) due date forfeits your right to carry that year's loss forward under Section 80, even if the loss itself was calculated correctly. A revised return only helps if it's filed within its own window — otherwise the loss is simply gone.
AIS shows a redemption or sale that doesn't match your own records. Pull your broker's statement, your fund registrar's (CAMS or KFintech) statement, and your property registration papers, and reconcile all three against the Annual Information Statement before you file anything. A transaction sitting in AIS that's missing from your return is, by far, the most common reason multi-asset filers get a mismatch notice.
Broker's capital gains statement for equity and mutual fund sales (digital copy accepted)
Property sale and purchase deeds showing the registration value (digital copy accepted)
Purchase invoices for physical gold, if that's one of your assets (digital accepted; ask your jeweller for a duplicate if you've lost the original)
Exchange statements for every crypto platform you traded on (digital copy accepted)
Form 26AS and your AIS, both from the e-filing portal
The Cost Inflation Index table, if you're going with the 20%-with-indexation route on pre-23-July-2024 property
File after the due date and you're looking at a flat fee under Section 234F — ₹5,000 if your total income is above ₹5 lakh, ₹1,000 if it's at or below that. Worse than the fee itself: filing late forfeits your carry-forward rights under Section 80, for good. Under-report a gain and you're facing a 50% penalty on the shortfall under Section 270A; deliberately misreport it — say, by inflating a loss to offset a gain — and that penalty jumps to 200%. Miss an advance tax instalment once your capital gains push your total liability past ₹10,000, and interest kicks in under Sections 234B and 234C.
Yes, but only if the equity loss is short-term. A short-term capital loss on equity can reduce a long-term property gain, under Section 70(2). A long-term equity loss, on the other hand, can't touch a short-term property gain — it can only reduce another long-term gain.
No, and this is the misconception that catches the most people out. A lot of investors assume any capital loss can offset any capital gain. It can't. A long-term loss — whether from gold, property, or anything else — can only be set off against a long-term gain, under Section 70(3).
Yes, as long as you're matching short-term with short-term or long-term with long-term. A long-term property loss offsets a long-term mutual fund gain, but it won't reduce a short-term mutual fund gain.
No, not under any circumstances. Section 115BBH(2)(b) blocks a VDA loss from being set off against any other income at all, and it can't be carried forward to a future year either.
Once Schedule CYLA and Schedule BFLA apply the current year's set-off, whatever's left over populates Schedule CFL automatically, split between short-term and long-term. That carry-forward is only valid if your original return was filed by the due date.
You can't claim carry-forward for a loss you didn't report at the time, even by filing a revised return later. The right to carry it forward is tied to timely disclosure in that year's original filing, not a correction made afterwards.
No. That exemption under Section 112A belongs only to listed equity shares and equity mutual funds. Property and gold gains under Section 112 have no equivalent yearly exemption.
Work out the STCG and LTCG for each period separately, using that period's own rate — 15%/10% before the cutoff, 20%/12.5% after it — then combine the totals when you net. Don't apply one blended rate across the whole year.
Yes. The Section 70 to 74 sequence applies to NRIs filing ITR-2 exactly the same way it applies to residents, though TDS is usually deducted upfront on property and equity sales. Reconcile that TDS against your final computed liability when you file.
They transfer with you regardless of which form you use next, as long as the original return was filed on time and the loss was correctly disclosed in Schedule CFL.
Before you touch the ITR form, pull together your broker, registrar, and exchange statements — netting only works once every transaction is correctly classified. Run your figures through Toolisky's multi-asset capital gains netting calculator to see your final taxable STCG, LTCG, and carry-forward balance in one shot. Thinking about tax-loss harvesting before March 31? Our guide on how to save LTCG tax legally in India walks through it. If crypto is part of your mix, crypto tax India 2026 covers the VDA rules in full. And for the set-off provisions straight from the source, the Income Tax Department's official guidance is worth bookmarking.
For educational purposes only. Verify all figures at official sources before acting. Toolisky is not affiliated with any government body. Consult a qualified CA or legal professional before making compliance decisions. See toolisky.com/accuracy-and-limitations.
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