Where the assessee has suffered loss on transfer of certain capital asset and earned profit on transfer of other capital assets, he is entitled to have the amount of such loss set off against such gains. Any loss remaining unadjusted under the head 'capital gains', however, cannot be set off against income under the other heads, e.g. salaries, house property, business or profession and other sources, but shall be carried forward for set off against capital gains in the subsequent assessment year. However, no loss shall be carried forward for more than eight assessment years from the year for which the loss was first computed.

Example : For the A.Y. 2001-2002.

A resident individual has income under "salaries" of Rs. 1,80,000/-, capital loss on sale of shares of Rs 1,50,000 and capital gains on sale of a residential unit of Rs. 50,000/-. He has no other income.

(since loss under capital gains cannot be set off against the income under any other head)

If in A.Y. 2002-2003, the assessee has income under 'Salaries' of Rs. 2,30,000/-, Capital Gains on sale of shares of Rs. 50,000/- and no income under any other head.