The advantage of long-term capital gain is that certain special deductions are allowed while computing the next taxable income in respect of such capital gain. In case a capital asset is held for a period less than 3 years — less than 12 months in the case of shares, units, securities traded on a stock exchange — any profit resulting from the transfer of the capital asset is a short-term capital gain.
Accordingly, the assessee can plan the disposal of his capital assets on the basis of duration of their holding. Such assets have to be further classified into assets yielding long-term capital gains and long-term capital losses.
In the same way, the capital assets should further be sub-classified into assets yielding short-term capital gains and short-term capital losses. Hence by proper tax planning, an assessee can adjust short-term capital losses against the short-term capital gains or the net long-term capital gains after deduction under Section 48 and also plan the long-terms capital gains in such a manner that he stands to gain the maximum benefit of exemptions and deductions.
However, long-term capital loss is allowed adjustment only against long-term capital gain and in case there is no long-term capital gain, then the long-term capital loss would be carried forward for eight years for set off against long-term capital gain only.