How to Report Stock Market Capital Loss in ITR-2 — Set Off & Carry Forward
Step-by-step portal walkthrough for reporting losses, claiming set-off against gains, and carrying forward unabsorbed losses for up to 8 years
Last updated: July 2026 • AY 2026-27 • 14 min read
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Table of Contents
- Why You Must Report Losses (Even If No Tax Is Due)
- Set Off Rules — Which Losses Can Offset Which Gains
- Carry Forward Rules — 8-Year Window
- Step-by-Step: Reporting Losses on the ITR Portal
- Schedule 112A — LTCG Entry for Shares Bought After Jan 2018
- Schedule CYLA — Current Year Loss Adjustment
- Schedule BFLA — Brought Forward Loss Adjustment
- Interactive Filing Checklist — Capital Gains & Loss Steps
- Common Mistakes to Avoid
1. Why You Must Report Losses (Even If No Tax Is Due)
Many taxpayers skip filing when they have only losses in the stock market — thinking "no profit, no tax, no filing needed." This is a costly mistake.
⚠️ Critical Rule: No Filing = No Carry Forward
Under Section 80 of the Income Tax Act, capital losses can only be carried forward if you file your ITR before the due date (31 July for non-audit cases). If you miss the deadline or don't file at all, you permanently lose the right to set off those losses in future years.
Benefits of Reporting Losses
- Set off against current year gains: STCG losses reduce your STCG and LTCG profits in the same year
- Carry forward for 8 years: Unabsorbed losses can offset future year gains, saving tax when you eventually profit
- Avoid notices: AIS already shows your transactions — not reporting them triggers mismatch notices from the IT department
- Establish a loss record: Once filed, the loss is on record and you can claim it without dispute in future years
Example: You lost ₹2,00,000 in stocks in FY 2025-26. If you file ITR-2 by 31 July 2026, you can carry forward this loss. Next year, if you make ₹3,00,000 STCG, you only pay tax on ₹1,00,000 (₹3L − ₹2L carried forward). Tax saved ≈ ₹40,000.
2. Set Off Rules — Which Losses Can Offset Which Gains
The Income Tax Act has specific rules about which losses can be set off against which income. Understanding these prevents mistakes on the portal.
Intra-Head Set Off (Within Capital Gains)
| Loss Type | Can Set Off Against | Cannot Set Off Against |
|---|---|---|
| STCG Loss | Any STCG + Any LTCG | Salary, house property, business, other sources |
| LTCG Loss | Only LTCG (any asset type) | STCG, salary, house property, business, other sources |
| Loss under Sec 111A (listed equity STCG) | Any STCG + Any LTCG | Non-capital-gain income |
| Loss under Sec 112A (listed equity LTCG) | Only LTCG (any section) | STCG or any other head |
Key Rule: STCG losses are more flexible — they can offset both STCG and LTCG. But LTCG losses can only offset other LTCG. This makes STCG losses more valuable for tax planning.
Inter-Head Set Off (Against Other Income)
Capital losses (both STCG and LTCG) cannot be set off against any other head of income — salary, house property, business, or other sources. This is a strict rule with no exceptions.
⚠️ Crypto/VDA Losses — Special Restriction
Losses from crypto/VDA (Section 115BBH) cannot be set off against ANY income — not even other capital gains. They also cannot be carried forward. Crypto losses are essentially dead losses.
Exception — House Property Loss: Loss under the head "Income from House Property" (e.g., home loan interest exceeding rental income) CAN be set off against salary/other income up to ₹2 lakh per year. But this is a house property loss, not a capital loss.
3. Carry Forward Rules — 8-Year Window
When losses cannot be fully set off in the current year, the unabsorbed portion can be carried forward to future assessment years. Here are the rules:
| Rule | Details |
|---|---|
| Maximum carry-forward period | 8 assessment years immediately following the loss year |
| Filing deadline | ITR must be filed on or before the due date (31 July for non-audit) |
| STCG loss carried forward | Can offset future STCG + LTCG only (not salary/business) |
| LTCG loss carried forward | Can offset only future LTCG (not STCG or other income) |
| Form requirement | ITR-2 (or ITR-3). ITR-1 cannot report losses. |
| Speculative loss (intraday) | Carry forward 4 years, set off only against speculative income (not CG) |
Worked Example — Carry Forward Over 2 Years
FY 2025-26 (AY 2026-27): STCG loss of ₹3,00,000. No other capital gains. File ITR-2 by 31 July 2026.
→ Entire ₹3L loss carried forward.
FY 2026-27 (AY 2027-28): STCG profit of ₹1,50,000 and LTCG of ₹2,00,000.
→ Set off ₹1.5L against STCG (STCG becomes ₹0) + ₹1.5L against LTCG (LTCG becomes ₹50,000).
→ Total loss absorbed = ₹3L. Remaining loss = ₹0.
→ Tax saved ≈ ₹30,000 (STCG) + ₹18,750 (LTCG) = ₹48,750
Important: If you filed a belated return (after 31 July), you cannot carry forward capital losses. The only exception is loss under "Income from House Property" — which can be carried forward even with belated filing. So always file on time when you have losses.
4. Step-by-Step: Reporting Losses on the Income Tax Portal
Here's the exact sequence to report stock market losses in ITR-2 on incometax.gov.in:
Login & Select ITR-2
Go to incometax.gov.in → Login with PAN + password → Aadhaar OTP →
e-File → Income Tax Returns → File ITR → AY 2026-27 → Online → ITR-2 → Start New Filing
You need ITR-2 (not ITR-1) because capital gains/losses require Schedule CG which only exists in ITR-2 and above.
Enable "Capital Gains" Schedule
In the Part A - General section, when asked "Which schedules are applicable?" → Tick "Schedule Capital Gains". Also tick "Schedule CYLA" (Current Year Loss Adjustment) if you have gains in other categories.
Navigate to Schedule CG
Go to Income Details → Schedule Capital Gains. You'll see sections for Short-Term (A) and Long-Term (B).
Enter STCG Loss (Section 111A — Listed Equity)
For listed equity/equity MF losses (STT paid), go to:
Short-Term Capital Gains → B1: From sale of equity share/MF units (Sec 111A)
- Full value of consideration: Total sale amount (e.g., ₹8,00,000)
- Deductions u/s 48: Cost of acquisition + expenses (e.g., ₹10,00,000)
- Balance (auto-computed): This shows negative (e.g., −₹2,00,000) — this is your loss
- STT paid: Enter the STT amount from your broker contract note
The portal accepts negative values here. Don't enter the loss as positive.
Enter LTCG Loss (Section 112A — Listed Equity)
For listed equity/equity MF held >12 months, go to:
Long-Term Capital Gains → B5: From sale of equity share/MF units (Sec 112A)
- Full value of consideration: Total sale amount
- Cost of acquisition: Use grandfathered cost if shares held before 1 Feb 2018
- Balance: Negative value = your LTCG loss
Note: The ₹1.25L exemption under Sec 112A only applies to gains, not losses. Report full loss amount.
Enter Trade-Wise Details (If Required)
The portal may ask for scrip-wise / trade-wise details. For each transaction, enter:
- ISIN: 12-character code (e.g., INE002A01018 for Reliance)
- Name of share: Company name
- No. of shares: Quantity sold
- Sale price per share: From broker contract note
- Cost of acquisition per share: Purchase price (or grandfathered value)
- Transfer expenses: Brokerage + STT + other charges
Tip: Download your broker's Tax P&L statement — it contains ISIN, buy/sell dates, and amounts pre-computed. Zerodha Console → Reports → Tax P&L. Groww → Reports → P&L Report.
Verify Schedule CG Summary
After entering all transactions, scroll to the Schedule CG Summary at the bottom. Verify:
- Total STCG: Should show your net STCG (negative if loss)
- Total LTCG: Should show your net LTCG (negative if loss)
- Cross-check with your broker's annual capital gains report
Complete Schedule CYLA (Auto-Populated)
If you have gains in some categories and losses in others, the portal auto-populates Schedule CYLA (Current Year Loss Adjustment). Review that set-off is applied correctly — STCG losses against STCG/LTCG, LTCG losses only against LTCG.
Verify Schedule CFL (Carry Forward)
Navigate to Schedule CFL (Carry Forward of Losses). The unabsorbed loss after CYLA adjustment automatically appears here. Verify the amount matches your expected carry-forward. This loss will pre-fill in next year's ITR under Schedule BFLA.
e-Verify Before Due Date
Submit and e-verify (Aadhaar OTP / Net Banking / DSC) your return. Remember: carry-forward benefit is only available if you file before 31 July 2026 (the due date). Late filing = loss forfeited permanently.
5. Schedule 112A — LTCG Entry for Shares Bought After Jan 2018
This is the trickiest part of reporting LTCG losses on the portal. If your shares were bought after 31 January 2018 (which is the case for most retail investors today), the portal uses a "consolidated entry" approach that confuses many filers. Here's exactly how it works:
⚠️ Important: CSV Upload Does NOT Work for Post-2018 Shares
The portal's "Upload CSV" feature in Schedule 112A has a known limitation — it does not accept data for shares acquired after 31 Jan 2018. You must use the manual consolidated entry method described below.
How to Navigate to Schedule 112A
- In Schedule CG, go to B(I). Long-term capital gain (LTCG)
- Expand Item 3 — "From sale of equity share or unit of equity oriented fund on which STT is paid under section 112A"
- Click "View Schedule 112A" — this opens the separate Schedule 112A form
- You'll see an entry with dropdown, ISIN field, and amount fields
Filling the Consolidated Entry (After 31st January 2018)
When you select "After 31st January 2018" from the dropdown, the portal auto-fills:
- ISIN Code →
INNOTREQUIRD(not a real ISIN — means "not required") - Name →
CONSOLIDATED - Most fields appear greyed out
✅ The Two Fields You CAN Edit
Despite the greyed appearance, these two fields ARE editable — click directly on them:
- Field (6) — Full Value of Consideration: Enter your total sale proceeds (sum of all LTCG sales)
- Field (8) — Cost of acquisition: Enter your total purchase cost (sum of all buy values)
Example — Reporting ₹50,000 LTCG Loss
| Field | Value | Source |
|---|---|---|
| (1a) Acquired | After 31st January 2018 | Dropdown selection |
| (2) ISIN | INNOTREQUIRD | Auto-filled |
| (3) Name | CONSOLIDATED | Auto-filled |
| (6) Full Value of Consideration | ₹4,50,000 | Total sale proceeds from broker P&L |
| (8) Cost of Acquisition | ₹5,00,000 | Total buy value from broker P&L |
| (10) FMV on 31 Jan 2018 | ₹0 | Not applicable (bought after 2018) |
| (12) Transfer expenses | ₹0 | Usually included in sale value |
| (14) Balance (auto) | −₹50,000 | = (6) − (7+12) = 4,50,000 − 5,00,000 |
Where to Get the Numbers
Your broker's Tax P&L report (Zerodha Console → Tax P&L, Groww → Tax Reports) has these fields:
- Sell Value (all long-term equity trades) → use for Field (6)
- Buy Value (all long-term equity trades) → use for Field (8)
- Look under "Equity Long Term" section of the report
- Add up all scrips: e.g., Stock A sell value + Stock B sell value = total for Field (6)
After Saving Schedule 112A
Once you Save the Schedule 112A entry, the loss automatically flows back to:
- Schedule CG → Item B3 → Field (a): Shows your LTCG u/s 112A (e.g., −₹50,000)
- Schedule CG → Item B3 → Field (c): Long-term Capital Gains = (a) − (b) deduction = −₹50,000
- Schedule CG → B12: Total LTCG = −₹50,000
- Schedule CFL: Loss carried forward for 8 years under "Long term capital loss"
💡 Pro Tip — Entering STCG Loss is Simpler
For STCG losses (Section 111A), the process is straightforward. In Schedule CG → A(I) → Item 2:
• Select Section = 111A [for others]
• Field (2a) Full value of consideration = total sale proceeds
• Field (bi) Cost of acquisition = total purchase cost
• Field (2e) auto-computes = negative value (your loss)
No separate schedule needed — it's all on one form.
6. Schedule CYLA — Current Year Loss Adjustment
Schedule CYLA handles the automatic set-off of losses against gains within the same assessment year. The portal computes this for you, but you should verify it.
How Schedule CYLA Works
- Portal lists all income heads: Salary, House Property, Business, Capital Gains (STCG/LTCG), Other Sources
- For capital gains, it shows STCG and LTCG separately
- Losses from one sub-head are adjusted against gains from permitted sub-heads
- The "Income after set-off" column shows the net taxable amount per head
- Any remaining unadjusted loss flows to Schedule CFL (Carry Forward of Losses)
Example — CYLA in Action
Your capital gains situation in AY 2026-27:
• STCG (Sec 111A) from listed equity: −₹1,50,000 (loss)
• LTCG (Sec 112A) from MF redemption: +₹2,00,000 (gain after ₹1.25L exemption)
Schedule CYLA will set off ₹1,50,000 STCG loss against the ₹2,00,000 LTCG.
→ Net LTCG = ₹2,00,000 − ₹1,50,000 = ₹50,000 (taxable at 12.5%)
→ Tax saved = ₹1,50,000 × 12.5% = ₹18,750
Portal behavior: Schedule CYLA is auto-populated based on your Schedule CG entries. You typically don't need to manually enter values. Just verify the set-off logic matches the rules (STCG loss → STCG + LTCG; LTCG loss → only LTCG).
7. Schedule BFLA — Brought Forward Loss Adjustment
If you carried forward losses from previous years, Schedule BFLA is where you claim them against current year gains.
How to Claim Brought-Forward Losses
- The portal pre-fills losses from your previously filed ITRs (Schedule CFL from prior years)
- Navigate to Schedule BFLA → shows loss year, type (STCG/LTCG), and amount
- Enter current year gains available for set-off
- The portal auto-adjusts: STCG loss from earlier year against current STCG + LTCG; LTCG loss against current LTCG only
- Remaining unabsorbed amount continues in CFL for the next year
💡 TaxZen tracks your losses: When you use TaxZen's Interactive Filing Checklist, it automatically identifies losses and shows the correct set-off amounts. The checklist's "Loss Setoff" step tells you exactly how much was offset and how much to carry forward.
Not pre-filled? If brought-forward losses don't appear automatically, it could mean: (a) prior year ITR was filed late (after due date), (b) prior year ITR was not processed, or (c) the loss year is older than 8 years. In case (a), the loss is permanently forfeited.
8. Interactive Filing Checklist — Capital Gains & Loss Steps
TaxZen's Interactive Filing Checklist guides you through every portal step with your actual computed values. Here's how the relevant steps map to what we covered above:
| Checklist Step | What It Does | Portal Location |
|---|---|---|
| Login to Income Tax Portal | Portal login → Section above Step 1 | incometax.gov.in → Login |
| Select AY & ITR Form | Picks ITR-2 and AY 2026-27 | e-File → ITR → File |
| Fill Capital Gains (Schedule CG) | Shows your STCG/LTCG amounts (gains or losses) with copyable values | Income Details → Capital Gains |
| Loss Setoff (Auto-Applied) | Shows how much loss was set off and tax saved — maps to Schedule CYLA | Schedule CYLA (auto-populated) |
| Verify & Submit | Final verification and e-verification step | Preview → Submit → e-Verify |
Use the checklist for a guided experience: Enter your income details in TaxZen, and the Interactive Filing Checklist will show you exact amounts for each Schedule CG field — including losses. It tracks your progress step-by-step.
Get My Filing Checklist →9. Common Mistakes to Avoid
Not filing ITR when you have only losses
Without timely filing, carry-forward benefit is lost forever. File ITR-2 even if total income is below taxable limit.
Filing ITR-1 instead of ITR-2
ITR-1 has no Schedule CG. You cannot report capital losses in ITR-1. Must use ITR-2 or ITR-3.
Filing after the due date (belated return)
Section 80 requires filing by 31 July (non-audit). Belated return = no carry-forward of capital losses.
Trying to set off LTCG loss against STCG
LTCG losses can ONLY offset LTCG gains. They cannot reduce your STCG tax. Only STCG losses have the flexibility to offset both.
Setting off capital losses against salary or FD interest
Capital losses (STCG or LTCG) can NEVER offset non-capital-gain income. They stay within the capital gains head only.
Claiming crypto/VDA losses against equity gains
Section 115BBH prohibits any set-off of crypto losses — even against other capital gains. Crypto losses are dead losses.
Treating intraday losses as capital losses
Intraday trading is "speculative business income" — losses here can only offset speculative profits, not capital gains. Goes in ITR-3.
Not reconciling with AIS/26AS data
The IT department has your transaction data. Reporting lower losses or omitting transactions triggers mismatch notices.
Forgetting to include transfer expenses (brokerage, STT)
Including brokerage and STT as cost/expenses increases your loss amount — giving you more to carry forward.
Let TaxZen compute your losses & set-off
Upload your broker P&L → get exact loss amounts, set-off calculation, and a step-by-step Interactive Filing Checklist with copyable values for the portal. Free, no account needed.
Compute My Losses & Get Checklist →Frequently Asked Questions
Can I carry forward stock market losses if I file a belated return?
Can STCG losses be set off against LTCG?
For how many years can I carry forward capital losses?
Do I need to file ITR-2 if my only income is salary but I have stock losses?
Can I set off stock market losses against my salary income?
What happens to losses from crypto/VDA trading?
Is there any minimum loss amount required to file?
Related Guides
Disclaimer: This guide is for educational purposes only and does not constitute tax, legal, or financial advice. Set-off and carry-forward rules depend on individual facts and circumstances. Verify with a qualified CA before filing. Rules as per Income Tax Act applicable for AY 2026-27.
Sources: TaxGuru — Report Stock Market Loss in ITR-2, Groww — How to File ITR-2 with Capital Gains, ClearTax — Set Off & Carry Forward of Losses