Is there any tax law prohibiting losses booked due to wash sales rule in Indian market?

e.g. If I buy a Sun Pharm stock at 634. After 10 days, I sold it at 609.25 and buy again at 608.75 in the same day. Can I still claim loss of 25.75?

  • for calculation of P&L first-in-first-out is used. so If you bought high, sold low it will be considered loss. Dec 22 '16 at 10:14

I sold it at 609.25 and buy again at 608.75 in the same day

If you Sold and bought the same day, it would be considered as intra-day trade. Profit will be due and would be taxed at normal tax brackets.

Best Consult a CA. This is covered under Indian Accounting Standard

AG51 The following examples illustrate the application of the derecognition principles of this Standard. (e) Wash sale transaction. The repurchase of a financial asset shortly after it has been sold is sometimes referred to as a wash sale. Such a repurchase does not preclude derecognition provided that the original transaction met the derecognition requirements. However, if an agreement to sell a financial asset is entered into concurrently with an agreement to repurchase the same asset at a fixed price or the sale price plus a lender's return, then the asset is not derecognised.

This is more relevant now for shares/stocks as Long Term Capital Gains are tax free, Long Term Capital Loss cannot be adjusted against anything. Short Term Gains are taxed differentially.

Hence the transaction can be interpreted as tax evasion, professional advise is recommended. A simple way to avoid this situation; sell on a given day and buy it next or few days later.

  • How profit will be calculated? Bought is after sold activity? And how much tax? Dec 23 '16 at 4:25
  • Can you point to link of any act or document for it? Dec 23 '16 at 4:25

Looks like there are no specific rule in India to prevent Wash sales. See the link below. http://economictimes.indiatimes.com/wealth/personal-finance-news/investors-can-rejig-portfolio-book-short-term-loss-to-save-tax/articleshow/7812788.cms?intenttarget=no

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.