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LOSSES
CARRY FORWARD OF LOSSES
Where a loss cannot be set-off during the tax year in which it occurred, then it may be carried
forward for adjustment against the incomes of the succeeding years. However, taxpayer can carry
forward only such losses, which are assessable under the following heads only:
1. Non-speculative business.
2. Speculation business.
3. Capital gain
Loss arising under any other head cannot be carried forward for set-off against the income of future
years.
RULES FOR CARRY FORWARD
Non-speculation business 57(1) & (2)
• Any unadjusted loss from business can be carried forward for setting it off
against the profits and gains under the head income from business.
• This loss can be carried forward up to six years immediately succeeding the
tax year for which the loss was first assessed.
• More than one tax year’s losses are being carried forward, loss of the earliest
tax year shall be set-off first.
Speculation Losses 58(2)
The losses sustained by taxpayer from a speculation business can be carried forward
up to six years for set-off against the profit and gains from the speculation business
only.
An AOP, being taxable independent of its members, is entitled to set-off and carry forward
its losses as other persons are entitled.
As the share received by a member out of the income of an AOP is exempt from tax,
the member is not allowed to set-off and carry forward his respective share in losses of
the AOP.
Only AOP can set –off and carry forward its losses.