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■ Loss arising in one head of income in any year can be set off against profit arising under
any other head except capital loss or loss on speculative transaction or property income
in the same year.
– Balance of loss, if remains, can be carried forward to be set off against profit
under same head for six years.
– Capital loss of Tk. 5,000 in a year cannot be carried forward nor can it be set off
against profit under any other head.
– Unabsorbed depreciation brought forward together with current year's
depreciation allowance forms total depreciation charge for the year.
– Unabsorbed depreciation can be carried forward indefinitely i.e. without time limit
of six years.
– For carry forward and set off right the assessee and the broad character of
business must remain same.
INTRODUCTION TO SET OFF AND CARRY FORWARD OF LOSSES
■ Tax is imposed on income and thus, if loss is generated from any heads; government
offers sufficient options to make the assessee well off enough so that tax may be
collected. Two such options are:
– a) Set off
– b) Carry forward and set off
■ Logically, set off considers only one year whereas carry forward includes subsequent
years. As assessee have multiple sources of income, it is very common that loss will not
generate from each heads. Thus losses from one head may be adjusted with income
from other heads so that net figure results income and tax can be imposed on that.
However, if the total income from all heads results losses, set off cannot be done
practically. In such a situation, loss of one year can be carried forward to subsequent
years for set off.
SET OFF OF LOSSES: SEC 37