business loss (non-speculative) can be set off against capital gains (both short-term and long-term), subject to restrictions under Section 71

business loss (non-speculative) can be set off against capital gains (both short-term and long-term), subject to restrictions under Section 71:

✅ Allowed

  • Business loss (other than speculative loss) can be set off against income under any head (except salary).

  • So, if you have a business loss and a taxable capital gain, you can adjust the loss against that gain.

📌 Example:

  • Business loss = ₹4,00,000

  • LTCG (u/s 112A) = ₹3,00,000
    ➡ Net taxable income = ₹(4,00,000 – 3,00,000) = ₹1,00,000 (loss carried forward if return filed in time).

❌ Not Allowed

  • Speculative business loss → can be set off only against speculative business income (not capital gains).

  • Loss from specified business u/s 35AD → only against specified business income.

  • Capital loss → cannot be set off against business income (only against capital gains).

👉 So the direction is:

  • Business Loss → Capital Gain ✅

  • Capital Loss → Business Income ❌


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