Set Off and Carry forward OF LOSSES

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As per Income Tax Act, 1961, if any loss arises in a particular year can be set off against the income of that year and if there is no sufficient income to adjust such losses in a particular year then such loss can be carry forward to the subsequent year. Losses can be an inter head set off or an intra head set off.

Intra head set off

EXCEPTIONS:

  1. Losses from long term capital gain can be set off only from the income under the head long term capital gain however losses from short term capital gain can be set off against both short term and long term capital gains.
  2. Losses from speculative income can be set off only against income from speculative income and allowed to set off against any other income.
  3. Losses from owning and maintaining horse races can be set off against income from owning and maintaining horse race only.
  4. Losses from specified business can be set off against income from specified business only however any other losses can be set off against income from specified business.

Inter head set off

  1. Loss from house property can be set off against income from salary.
  2. Losses from business other than speculative business can be set off from any other income except salary income.

CARRY FORWARD OF LOSSES

If there is no sufficient income in the year of which the loss relates then such unadjusted loss can be carry forward to subsequent year.

LOSSES FROM BUSINESS

  1. Business loss can be carry forward up to next 8 assessment year from the assessment year in which loss was incurred.
  2. Loss from business can be set off from income from business or profession
  3. No set off is allowed if return is not filled within the original due date
  4. Set off of loss shall be allowed even if business does not exist in future year.

LOSSES FROM SPECULATIVE BUSINESS

  1. Loss from speculative can be carry forward to next 4 assessment year from the assessment year in which loss was incurred.
  2. Loss from speculative business can be set off from speculative business income only.
  3. No set off is allowed if return is not filled within the original due date
  4. Set off of losses shall be allowed even if business does not exist in future year.

LOSSES FROM OWNING AND MAINTAINING HORSE RACE

  1. Loss from owning and maintaining can be carry forward up to next 4 assessment year from the assessment year in which loss was incurred.
  2. Loss from owning and maintaining can be set off from owning and maintaining income only.
  3. No set off is allowed if return is not filled within the original due date

LOSSES FROM HOUSE PROPERTY

  1. Loss from house property can be carry forward up to next 8 assessment year from the assessment year in which loss was incurred.
  2. House property can be set off against income from house property.
  3. Loss shall be allowed to adjust even when return is belatedly filed.

LOSSES FROM CAPITAL GAIN

  1. Loss from capital gain is allowed to carry forward up to next 8 year.
  2. Long term capital loss can be set off against long term capital gain only but short term capital loss can be set off against both short term and long term capital gain.
  3. No set off is allowed if return is not filled within the original due date

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