I have incurred a short-term capital loss from my equity MFs and direct equity investments in the current financial year. I also have short-term capital gains from my debt MFs (investments in Liquid, Liquid plus, Income and Gilt mutual funds). Am I allowed to set-off this short-term capital loss from equity MFs/direct equity investments with the short-term capital gain from the various aforesaid investments in debt MFs?
Short-term capital loss can be set off against any capital gain (whether long-term or short-term) while long-term capital loss can be set off only against long-term capital gain. Moreover, if the capital loss cannot be set off against the capital gain of that particular year, then it can be carried forward for the next eight years.
So, you can set off your short-term capital loss from equity against the short-term capital gain of both your equity and debt investments as well as long-term capital gains of only debt (as long-term capital gain on equity is exempt from tax).