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    29 Carry Forward and Set Off of Losses in Case of Certain Companies

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    Seiya Kapahi
    The document discusses the provisions in Indian income tax law for setting off and carrying forward of losses. It explains that losses from one source of income can be set off against profits from another source under the same head of income (intra-head set off), and some losses can also be set off against income from other heads (inter-head set off). Any losses remaining after set off can be carried forward to future years for set off against future income, subject to time limits and conditions that vary for different heads of income such as business, house property, capital gains. The document provides details on these rules for different types of losses.

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    29 Carry Forward and Set Off of Losses in Case of Certain Companies

    Uploaded by

    Seiya Kapahi
    29 views13 pages
    The document discusses the provisions in Indian income tax law for setting off and carrying forward of losses. It explains that losses from one source of income can be set off against profits from another source under the same head of income (intra-head set off), and some losses can also be set off against income from other heads (inter-head set off). Any losses remaining after set off can be carried forward to future years for set off against future income, subject to time limits and conditions that vary for different heads of income such as business, house property, capital gains. The document provides details on these rules for different types of losses.

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    29 Carry forward and set off of losses in case of certain companies

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    The document discusses the provisions in Indian income tax law for setting off and carrying forward of losses. It explains that losses from one source of income can be set off against profits from another source under the same head of income (intra-head set off), and some losses can also be set off against income from other heads (inter-head set off). Any losses remaining after set off can be carried forward to future years for set off against future income, subject to time limits and conditions that vary for different heads of income such as business, house property, capital gains. The document provides details on these rules for different types of losses.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    29 views13 pages

    29 Carry Forward and Set Off of Losses in Case of Certain Companies

    Uploaded by

    Seiya Kapahi
    The document discusses the provisions in Indian income tax law for setting off and carrying forward of losses. It explains that losses from one source of income can be set off against profits from another source under the same head of income (intra-head set off), and some losses can also be set off against income from other heads (inter-head set off). Any losses remaining after set off can be carried forward to future years for set off against future income, subject to time limits and conditions that vary for different heads of income such as business, house property, capital gains. The document provides details on these rules for different types of losses.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    Carry forward and set off of losses in case of certain companies

    ARUN KUMAR
    Assistant Professor
    Department of commerce
    Hans raj College
    University of Delhi
    Set Off and Carry Forward of Losses

    • Profit and losses are two sides of a coin.


    Losses, of course, are hard to digest. However,
    the Income-tax law in India does provide
    taxpayers some benefits of incurring losses
    too. The law contains provisions for set-off
    and carry forward of losses which are
    discussed in detail in this article.
    Set off of losses

    • Set off of losses means adjusting the losses


    against the profit or income of that particular
    year. Losses that are not set off against income
    in the same year can be carried forward to the
    subsequent years for set off against income of
    those years. A set-off could be an intra-head
    set-off or an inter-head set-off.
    Intra-head Set Off
    • The losses from one source of income can be set off against income from another source
    under the same head of income.
    • For eg: Loss from Business A can be set off against profit from Business B, where Business A
    is one source and Business B is another source and the common head of income is
    “Business”.
    Exceptions to an intra-head set off
    1. Losses from a Speculative business will only be set off against the profit of the speculative
    business. One cannot adjust the losses of speculative business with the income from any
    other business or profession.
    2. Loss from an activity of owning and maintaining race-horses will be set off only against the
    profit from an activity of owning and maintaining race-horses.
    3. Long-term capital loss will only be adjusted towards long-term capital gains. However, a
    short-term capital loss can be set off against both long-term capital gains and short-
    term capital gain.
    4. Losses from a specified business will be set off only against profit of specified businesses.
    But the losses from any other businesses or profession can be set off against profits from
    the specified businesses.
    Inter-head Set Off
    • After the intra-head adjustments, the taxpayers can set
    off remaining losses against income from other heads.
    • Eg. Loss from house property can be set off against
    salary income.
    • Given below are few more such instances of an inter-
    head set off of losses:
    1. Loss from House property can be set off against
    income under any head
    2. Business loss other than speculative business can be
    set off against any head of income except income from
    salary.
    • One needs to also note that the following losses can’t be set
    off against any other head of income:
    • a. Speculative Business loss
    • b. Specified business loss
    • c. Capital Losses
    • d. Losses from an activity of owning and maintaining race-
    horses
    Carry forward of losses
    After making the appropriate and permissible intra-head and
    inter-head adjustments, there could still be unadjusted losses.
    These unadjusted losses can be carried forward to future years
    for adjustments against income of these years. The rules as
    regards carry forward differ slightly for different heads of
    income.
    These have been discussed here:
    • Losses from House Property
    1. Can be carry forward up to next 8 assessment
    years from the assessment year in which the
    loss was incurred
    2. Can be adjusted only against Income from
    house property
    3. Can be carried forward even if the return of
    income for the loss year is belatedly filed.
    • Losses from Non-speculative Business (Regular
    Business) Loss
    1. Can be carry forward up to next 8 assessment
    years from the assessment year in which the
    loss was incurred
    2. Can be adjusted only against Income from
    business or profession
    3. Not necessary to continue the business at the
    time of set off in future years
    4. Cannot be carried forward if the return is not
    filed within the original due date
    Speculative Business Loss

    1. Can be carry forward up to next 4 assessment


    years from the assessment year in which the
    loss was incurred.
    2. Can be adjusted only against Income from
    speculative business.
    3. Cannot be carried forward if the return is not
    filed within the original due date.
    4. Not necessary to continue the business at the
    time of set off in future years.
    Specified Business Loss under 35AD

    1. No time limit to carry forward the losses from


    the specified business under 35AD.
    2. Not necessary to continue the business at the
    time of set off in future years.
    3. Cannot be carried forward if the return is not
    filed within the original due date.
    4. Can be adjusted only against Income from
    specified business under 35AD.
    Capital Losses

    1. Can be carry forward up to next 8 assessment


    years from the assessment year in which the
    loss was incurred.
    2. Long-term capital losses can be adjusted only
    against long-term capital gains.
    3. Short-term capital losses can be set off against
    long-term capital gains as well as short-term
    capital gains.
    4. Cannot be carried forward if the return is not
    filed within the original due date.
    Losses from owning and maintaining race-horses

    1. Can be carry forward up to next 4 assessment years from the


    assessment year in which the loss was incurred.
    2. Cannot be carried forward if the return is not filed within the
    original due date.
    3. Can only be set off against income from owning and
    maintaining race-horses only.
    4. A taxpayer incurring a loss from a source, income from which
    is otherwise exempt from tax, cannot set off these losses
    against profit from any taxable source of Income
    5. Losses cannot be set off against casual income i.e. crossword
    puzzles, winning from lotteries, races, card games, betting etc.
    Thank You!

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