Capital Loss
The loss incurred when a capital asset is sold for less than its cost of acquisition.
Formula
Capital Loss = Cost of Acquisition + Transfer Expenses - Sale Consideration
Unit
₹
In depth
Capital losses have real value in the Indian tax code because they can be set off against capital gains and, if unused, carried forward for eight assessment years — but only if the return is filed by the due date. A short-term capital loss can be set against both short-term and long-term gains, whereas a long-term capital loss can only be set against long-term gains. This asymmetry is what makes the order of realisations worth planning. The behavioural difficulty is that investors realise gains readily and hold losses, which is exactly backwards for tax purposes and is documented as the disposition effect.
Worked example
A short-term capital loss of ₹50,000 is set against a short-term capital gain of ₹80,000, leaving ₹30,000 taxable instead of ₹80,000. At a 20% rate that saves 20% x 50,000 = ₹10,000 of tax.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Capital Loss” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.