Imrul kayas, ACA (Mobile No : 01737231658)

Set off and Carry forward of losses

Set Off: Any loss that has been sustained from any head of income that can be adjusted with any other
head of income within a particular income year. However, there are some exceptions. These are given
below;
Exception 1: Loss of any head cannot be set off any income of manufacturing of cigarette.
Note: This is restricted income. GB income Gi mv‡_ Ab¨ †Kvb head Gi loss set off Kiv hv‡e bv|
Exception 2: Loss from capital gain cannot be set off against any other head of income. But it is possible
to set off against income from capital gain.
Note: Capital loss to tk 5000 carried forward Kiv hv‡e bv in a particular income year. Z‡e tk 5000 Gi
Dc‡i hZ amount _v‡K ZZUzKz amount carry forward Kiv hv‡e| [Ref: Sec 40 (3) ].
Note: This is called restricted head of loss. GB head Gi loss Ab¨ †Kvb head Gi income Gi mv‡_ set off Kiv
hvq bv|
Exception 3: Loss from speculative business can be set off the profit of any other speculative gain.
Note: This is called restricted item. GB item Gi loss Ab¨ †Kvb head Gi income Gi mv‡_ set off Kiv hvq
bv|
Exception 4: Loss from business and profession cannot be set off against house property and capital
gain.
Exception 5: Loss from agricultural income cannot be set off against income from capital gain.
Exception 6: Loss on income exempted from tax is not allowed to set off.
Exception 7: Cash subsidy hw` cvIqv hvq, loss will be reduced.
Exception 8: Tax holiday unit Gi loss Ab¨ †Kvb head Gi mv‡_ Set off Kiv hv‡e bv| H loss within the tax
holiday period Gi g‡a¨ Set off Kiv hv‡e carry forward Gi gva¨‡g|
Carry forward of losses:
Period of carry
Head of income Sec Restriction /Allow
forward
A Loss from 41 6 Succeeding Set off any agricultural income in next year or
agricultural income assessment years years.
B loss from business 38 6 Succeeding Set off only same business income in next year
and profession assessment years or years
C Loss from capital 40 6 Succeeding Tk. 5000 cannot be set off during the income
gains assessment years year. The above tk. 5000 can be carried
forward in the next year or years for set off.
Item of Head 39 6 Successive Set off any speculative business income in
loss from Speculative (cici) assessment next year or years
business year
Unabsorbed 42(6) Unlimited period Set off only the head of income from business
deprecation and profession or agricultural income
Tax holiday 46(9) Within tax Profits and gains from the said undertaking
unit/undertaking holiday period
loss from tax holiday
undertaking

** Carry forward means set off of losses in next year or years within the time limit.

1
Carry Forward of loss of firm and partner:

In the case of a firm:

a) Where the assesses is a firm, the loss sustained by it under any head of income shall be set off
under section 37 only against the income of the firm under any other head and not against the
income of any of the partners of the firm and
b) Where the assessee is a partner of the firm, he shall not be entitled to have any loss sustained by
the firm carried forward and set off against his own income. [Ref: sec 42 (3)]

In the case of a firm, in the constitution of which a change has occurred-

a) The firm shall not be entitled to set off so much of the loss proportionate to the share of a retired or
deceased (g„Z) partner as exceeds his share of profits, if any, of the income year in the firm and
b) A partner of the firm shall not be entitled to the benefit of any portion of the said loss as is not
apportionable to him. [Ref: sec 42 (5)]

** Differences between forward contract and future contract in case of commodity:

Sl.
No Forward contract Future Contract
.
1 In case of forward contract actual delivery In case of future contract there in no physical
has occurred delivery, i.e. called notional delivery.
2 It is traded on the commodity market It is usually traded on stock market
3 Forward contract is a tailor made contract Future contract is a standardized contract
4 hedge efficiency is 100% Hedge efficiency is not always 100% because of
basis risk

Speculative business: [Sce 2 (61)]

Speculative business means business in which a contract for the purchase or sale of any commodity
including stocks and shares is periodically or ultimately settled otherwise than by the actual delivery or
transfer of the commodity or scripts.