1SET-OFF AND

CARRY FORWARD
OF LOSSES
Amendment of Secs. 72Aand 72AA Strategic Disinvestment (w.e.f. 1.4.2023)
Amendment of Sec. 79(1) Carry Forward and Set-off of (w.e.f. 1.4.2023)
Losses in case of Companies
SET-OFF OF LOSSES
Set-off of losses means setting-off losses against income of the same year. The provisions
regardingg set-off of losses are as under:
(1) Set-ofunder the same head: Ifthe net result for any assessment year in respect of any
sOurce falling under any head of income is a loss, the assessee shall be entitled to have the
amount of such loss set-off against the income from any other source under the same head. This
is also called inter-source adjustment. (Sec. 70)
However, the following are the exceptions to the above general rule:
(a) Loss from speculation business cannot be set-off against income from other business or
profession. This loss can be set-offonly against the income from another speculation business,
:4b) Loss of specifiedbusiness (See Sec. 35AD Profits and Gains of Business or Profession)
Mi cannot be set-off against income from other business. This loss can be set-off only
against income from other specified business.
lc) Long-term capital loss cannot be set-off against short-term capital gain This loss can
be set-off only against long-term capital gain.
(d) Loss from the activity of owning and maintaining race horses shall be set-off against
income from owning and maintaining race horses only and not against any other
income under the head other sources.
(e) Losses of lottery, crossword puzzles, gambling, card games or betting etc. cannot be
set-off against such income or any other income. Further, no loss under any head can
be set-off against such incomes.
(6 Loss from an exempted source of income cannot be set-off against any taxable income.
(2) Setoffagainst income under other heads :If after setting-off aloss under the same head
income there still remains some loss., the remaining loss shall be set-off against his income
ader any other head. |Sec. 71(1)
Restriction regarding set off of loss under the head Income from House Property
any other head of income
against
|Sec. 71 (3A)
et otf of loss under the head 'ncome from House Property' against any other head of income
loss can be carried
lorwand ced to ?2 lakh for any assessment year. However, the unabsorbed House Property'.
eight subsequent years for set-off under the head 'Income from under other heads
However,
(a)
the following losses cannot be set-off against income from
business; (b) Loss the activity of owning
aud Speculation
maintaining racelosses; (aa)(c)Loss
horse; Loss
specified
froma the head 'Capital Gains': (d) Loss under the head
under
 INCOME TAX
392
h.
Gains of Business or Profession' cannot be set-off against income under theete
'Profits and
(3) Loss from loss is not allowed
Business or Profession against winning from races, lotteries,
to be set-off
: Any loss from business (other than speculation
'Salaries'; (e) Any
any other income falling under the Sarme head
can be set-off against
business) or professionincome) except "Salaries'
(üncluding speculation as well as under any other head of income
from business or profession. In the
Unabsorbed depreciation is not treated as a loss32(2)
of Sec. are applicable. Hence, unabsorbe
of unabsorbed depreciation the provisionsunder the head Salaries'.
depreciation can be set-off against income
speculation business can be set-off only againe
(4) Speculation Los8s : Losses in respect of business,
profits and gains, if any, of another speculation carried on by the assessee. Losses f
profession and losses under the h
House property, loSses of non-speculation business or
Income from Other Sources' can, however, be set-off against the profts of speculation busine
[Sec. 731)
(4A) Loss ofspecified business :Any loss ofa specified business can be set-off against Droft
of any other specified business only. [Sec. 73A1)
: Losses from the acti
(5) Losses from the activity ofowning and maintaining race horses
offromowning andmaintaining race horses in any assessment year shall be set-off only against income
owning and maintaining race horses, and not against any other income.
(6) CapitalLosses : (a) Short-term : Such losses can be set-off against any other short
Sec. 74A(3)
capital gains or long-term capital gains only. t-term
(b) Long-term : Long-term capital loss can be set-off against long-term capital gains only
(7)Losses of lottery, erossord puzzles, gambling, card games or betting, etc : These losses
cannot be set-off against any income.
(8) Loss of Associationof Persons and Body of Individuals or Firm:The loss of A.0.P. and
B.O.I. or a Firm, which could not be set-off intra headwise and inter headwise as per the
provisions explained earlier, cannot be apportioned among the members/partners and the
members/partners are not entitled to set-off their share of loss from their personal incomes.
Set-off of Losses : At A Glance
Loss
1. Loss from house property Set-off
(a) Income from any other
house
b) Any other head of income upproperty
to 2,00,000
2 Loss from business or profession (a) Income from any other
business or profession
(b) Any other head of income
3 Loss from speculation except salaries
3A Loss from specified business Income from speculation
4
Short-term capital loss Income from any other specified business
(a) Short-term capital gains
Long-term capital loss (b) Long-term capital gains
6 Lo8s from the activity of
owning and Income Long-term capital gains
maintaining race horses from the activity of
owning and
Loss of lottery, crossword maintaining race horses
card games or betting, etc. puzzles, gambling, Cannot be set-off
Note:No loss can be set-off against any income.
against winnings from races,
lotteries, ete.
If it is not CARRY-FORWARD
possible AND SET-OFF OF
oocurred, 80 much of the loss as has notlo9ses during the same LOSSES
to set-off the
forward for being set-off been so set-off out of theassessment year in whieu d
been determined against his following losses can be cart
188(1) and it is theinsamepursuance ofa income in the
succeeding years
return filed by the assessee provided the losses
(1) Loss under aSBessee who sustained the loss: within the time uo
(2) Loss of the head 'Income from
(3) Loss of non-speculation
(3A) LoB8 of speculation business. business OrHouse Property'.
profession.
specified business.
 SET-OFF AND CARRY FORWARD OF
Short-term capital loss LOSSES 393

(5) Loss
from the
activity of Long-term capital loss.
owning and maintaining race horses
other than
Anyloss Housese mentioned above cannot be carried
forward and set-off in succeeding year.
(1) Loss from
Property'shal]
Property :
lbe carried forward and
The
unabsorbed loss under the head Income
sfei2tssessnent set-off in
yearsS against income from beouent assessment years up to amaximum
from
(2) Carryforwardaand set-offof non-specu lation business
property.losses: If for any assessment year
(Sec. 71B)
thenetresultnder the head 'Profits and Gains of
potbeingaloss of
speculation business), so muchBusiness or
of the loss Profession' is a
as has not beenloss to theaBse
so set-oft
essee

SForward to the tolowinB assessnent year and it shall be set-off

cArried
Profits and Gains of Business or against the income under
he hePar. it shall be carried Profession'.
forward for a maximum period ofbe8wholly
loss cannot set-off in the
fiately succeeding the assessment year for whi assessment years
which the loss was first computed. (Sec. 72(1)]
tebe business or profession has been discontinued loss can be carried forward and set-oft
minst profits and gains of business or profession
ther important points regarding carry-forward of business losses :
i Losses of discontinued business of an industrial ndertaking after re-establishment or
ol " 1f on account of natural calamities, like flood, cyclone, earthauake, riot, fire or enemy
stion ete, theunabsorbed
er. the business oflo8es
theindustrial undertaking
of the undertaking is bediscontinued
shall but revived
carried forward within 3years
and set-off'against the
t ofthe revived businesS or any other business up to a maximum period of 8 years as reckOned
m
the year in which the business is re-started.
() Treatment of Losses after succession takes place by inheritance :The loss incurred by the
(ther in the course of carrying on his business can be carried forward and set-off by his son, if
be succeeds to the business of his father on account of his death.
(3) Losses of speculation businesa : If for any assessment year any loss computed in respect
profits and
df speculation business has not been wholly set-offin the s
ins of any otherassessrmontsiness, sO much ofthe loss as aSessment
ASs
year l rried
pt so set-offshall
forwara
othe foliowing year and it shall be set-off against the profits and gains, if any,
speculation business, carried on by him. If the loss cannot be wholly set-off in the following year,
shall be carTied forward for a maximum period of four assessment years immediately succeeding
the assessment year for which the loss was first computed. (Sec. 73(2\4)]
(3A)Carry-forward and set-off of loss of specified business : The brought forward loss of
speified business shall be set-off against the profits and gains, if any, of anyspecified business,
amed on by the assessee. The loss can be carried forward andset-off till it is fully set-off.
(Sec. 73A(2)]
4) Carry-forward and set-off of Capital Losses : (a) Short-term Capital Loss : Short-term
aloss which cannot be wholly set-off in the same assessnent year, against income under
dcapital gains shall be carried forward to the following assessment year and shall be
magainst income, under the head capital gains. If the entire amount of carried forward
bloss cannot be set-ofin the following assessment year, the amount remaining unabsorbe
De carried forward to be set-off against capital gains in subsequent years up to a maximum
S computed.
ial ASsessment years immediately succeeding the assessment year for which the loss was
(Secs. 74(1) and (2)
D) Long-term Capital Loss : The long-term capital loss which cannot be wholly set-off in
olle assessment year against long-term capital gain shall be carried forward to the
Camied sessment year to be set-off against long-term capital gain, if any. This loss Can
iMEsward for a maximum period of eight assessment years Immediately succeeding
ca the
be
ent year for which the loss was first
O from owning and maintaining race computed.
tarry-for
iorward and set-off
horses :Owners of race horses are allowed to
ue OSS 1ncurred by them on the maintenance of race
the
tat COme from th
horwingsesthe na e source (i.e., income from the activity wning andhorses
subsequent year). This logs can be carried forward for 4
against
maintaining
assessment year when the loss was computed. assessment years
(Sec. 74A(3)(b)