The rule that govern the short-term capital losses are:

1. Any short-term capital loss can be set off against any capital gain both long-term and short-term and against no other income.
2. Any long-term capital loss can be set off only against long-term capital gain and against no other income(U/s 70 and 71(3)).
3. Any short term capital loss can be carried forward to the next eight assessment years and set off against capital gains in those years.
4. Any long-term capital loss can be carried forward to the next eight assessment and set off only against long term capital gain those years(U/s 74)