Key facts
- ITR filing may be mandatory for individuals with equity or mutual fund losses to carry them forward, even if total income is below exemption limits.
- Short-term capital losses do not require ITR filing if not carried forward and total income is below the exemption limit.
- F&O trading losses necessitate ITR filing for reporting.
- Long-term capital gains up to Rs 1.25 lakh from listed equities are tax-exempt but require disclosure in the ITR.
- Basic exemption limits are Rs 2.5 lakh (old regime) and Rs 4 lakh (new regime) for individuals under 60.
Individuals who incur losses from investing in listed equities or mutual funds may be required to file an Income Tax Return (ITR) if they wish to carry forward these losses to future tax years, even if their total income falls below the basic exemption limits. The basic exemption limit stands at Rs 2.5 lakh under the old tax regime and Rs 4 lakh under the new tax regime for individuals under 60 years of age.
According to Chartered Accountant Varun Singhal, if an individual's total income is below these exemption thresholds and they have incurred a short-term capital loss, filing an ITR is generally not mandatory if they do not intend to carry forward or set off such losses. The Income-tax Act mandates filing only when total income exceeds the maximum amount not chargeable to tax. However, losses from Future and Options (F&O) trading require an ITR for reporting purposes.