Section 111
Section 111: carry forward and set off of loss from capital gains
Section 111 governs what happens to a capital gains loss that could not be fully used up in the same tax year under Section 108. It lets the unabsorbed portion carry forward to future years, while preserving the same short-term/long-term distinction that applies to same-year set-off: short-term losses can offset any capital asset gain, but long-term losses can only offset other long-term gains.
Carrying the loss forward
Where a loss computed under 'Capital gains' for a tax year cannot be wholly set off against capital gains income as per Section 108, the unabsorbed loss (whether partly or wholly unabsorbed) is carried forward to the following tax year and set off as follows: a loss relating to a short-term capital asset is set off only against capital gains income for that year from any other capital asset; a loss relating to a long-term capital asset is set off only against capital gains income for that year from any other long-term capital asset.
If the loss cannot be wholly set off in that manner, the remaining unabsorbed amount is carried forward again to the next tax year, and so on.
The eight-year time limit
No loss can be carried forward under this section for more than eight tax years immediately following the tax year in which the loss was first computed.
Frequently asked questions
Can a carried-forward long-term capital loss be set off against short-term gains?
No - Section 111(1)(a)(ii) restricts a carried-forward long-term capital asset loss to being set off only against income from another long-term capital asset.
Can a carried-forward short-term capital loss be set off against long-term gains?
Yes - Section 111(1)(a)(i) allows a carried-forward short-term capital asset loss to be set off against capital gains income from any other capital asset, whether short-term or long-term.
How long can a capital gains loss be carried forward?
Up to eight tax years immediately following the tax year in which the loss was first computed.
Related sections
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Get help planning your capital loss carry-forwardLast updated 9 September 2026