Silver ETFs Outperform Equities Amid Market Volatility: A Comparative Analysis
Navigating Taxation of Capital Gains: A Guide to Setting Off Short-Term Profits Against Equity Losses
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Taxes on Capital Gains
According to the scheme of taxation, capital gains are divided into two categories - long-term capital gains (LTCGs) and short-term capital gains - depending on the holding period of the asset and nature of the capital asset. Profits on sale or transfer of listed securities and equity-oriented schemes are taxed as LTCGs if they are sold or transferred after one year or more. For other assets, it becomes long-term after two years. The profits on redemption or sale of debt funds purchased after March 31, 2023 will be taxed as STCG, irrespective of the holding period.
Setting Off Capital Losses
The law provides that short-term capital loss can be set off against both short and long-term capital gains, whereas long-term capital loss can only be set off against long-term capital gains. Therefore, only the short-term capital loss of equity investments can be set off against short-term capital gains on silver ETFs. Long-term loss on equity investment can only be set off against long-term capital gains earned on any capital asset during the year.
Carrying Forward Unsettled Losses
In case there are no long-term capital gains available for set off during the year, the long-term capital loss will have to be carried forward for eight subsequent years for set off against long-term capital gains only. If the short-term capital loss for the year cannot be fully set off against available short-term capital/long-term gains for the year, the same will also have to be carried forward and set off against short and long-term capital gains of eight subsequent years.
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| Asset Type | Holding Period | Taxation Category |
|---|---|---|
| Listed securities and equity-oriented schemes | Over 1 year | Long-term capital gains |
| Other assets | Over 2 years | Long-term capital gains |
| Debt funds | Purchased after March 31, 2023 | Short-term capital gains |
| Silver ETFs | Over 12 months | Long-term capital gains |
Investor Takeaway
Short-term capital gains from silver ETFs can be set off against short-term or long-term capital losses from equity investments.
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