- JUI TAMHANE

 Government derives revenues by levying

taxes. Taxes can be Indirect or Direct.
 Indirect taxes are in the form of custom

duties , excise duties, value added tax etc.

Income tax is a form of direct tax which is
based on the income of the person.
 All the laws relating to Income tax are

contained in the INCOME TAX ACT 1961

 There might be cases when we have loss
under one of the heads of income during the
same year & we also have profit under the
same or some other head of income, we can
reduce the profit by the amount of loss.
 For eg. If we have a loss of Rs.1lakh from the
head “income from property “ & we set it off
against “income from salary” the income gets
reduced by 1lakh. If we are in the 30% tax
bracket we would end up saving Rs. 30,000.
 If income is less than the loss we cannot set
off the full loss.
 In such cases we can carry forward the loss

to the next year so that we can set it off

against income in the subsequent years.
The following losses can be carried forward: -
 Loss under the head “Income from House

Property”.
 Loss under the head “Profits and Gains from

Business or Profession”.
 Loss under the head “Capital Gains”.
 Loss from the activity of owning and

maintaining race horses.

Sections Particulars

70 Set off of loss from one source against income from

another source under the same head of income.
71 Set off from one head against income from another.

71B Carry forward & set off of loss from House property.

72 Carry forward & set off of Business losses.

72A Amalgamation , conversion of firm or proprietary concern

to company.
73 Losses in speculation business

74 Losses under the head Capital gains.

74A Carry forward & set off of loss from owning & maintaining
race horses.
1. Inter – source adjustment under
the head of income (intra head
adjustment)
2. Inter – head adjustment in the
same assessment year.
3. Carry forward of loss.
If the net result for any assessment year, in
respect of any source under any head of
income, is a loss, the assessee is entitled to
have the amount of such loss set off against
his income from any other source under
head of income for the same assessment
year.
X has two businesses – A & B.
Profit From Business A Rs. 5,00,000
Loss From Business B Rs. 2,00,000.

The Loss of Rs. 2,00,000 can be set off with his

Profit of Rs. 5,00,000. Therefore the amount taxable
under the head Profit & Gains from Business will be
(500000 – 200000) Rs. 3,00,000.
Where the net result of computation made for
any assessment year in respect of any head
of income is a loss, the same can be set off
against the income from other heads.
X has two non speculative Besides he has income from
businesses A & B. house property.
Profit From Business A Rs. 70000
Loss From Business B Rs. 290000.
Income from House property Rs. 510000

The Net Loss from both businesses of Rs. 220000(290000-

70000) can be set off with House Property income of Rs.
510000. Therefore the net income taxable is Rs. 290000.
 Speculation Loss – Cannot be set off against
any other head.
 Capital Loss - Cannot be set off against any
other head except ‘Capital Gains’.
 Loss from the activity of owning and
maintaining race horses - Cannot be set off
against any other head.
 Business loss cannot be set off with Salary.
 Loss cannot be set off against winnings
from lotteries, crossword puzzles etc.
 Loss from purchase of securities.
 A loss under house property if could not be
set off in the same assessment year from
other heads of income , will be allowed to
carry forward & set off in the subsequent
years under this head.

 Loss can be carried forward for eight

assessment years.
 Income from House I – 60000
 Loss from House II – (30000)
NET INCOME 30000

He has brought forward losses H1 (98-99) 30000,

H2 (2001-02) 35000
 98-99 H1 loss will be ignored.

 Loss of 01-02 will be adjusted with 30000.

 Therefore 5000 will be carried forward.
 Loss can be set off only against business
income.
 Losses can be carried forward by the person

who incurred the loss.

 Loss can be carried forward for 8 years.
 Return of loss should be submitted in time.
 Continuity of business not necessary.
 Carry forward of unabsorbed depreciation,

capital expenditure on scientific research

and family planning expenses.
 Can be set off or carried forward against
any head of income except salary.
 Loss can be set off or carried forward for 8

years or indefinite period.

 Speculative loss can be set off only against
speculative income.
 Can be carried forward for 4 years.
 Continuity of Business is not necessary.
 Return of Loss should be submitted in time.
 Long term capital loss can be set off only
against long term capital gains.

 Short term can be set off against short term or

long term capital gains.

 Such loss can be carried forward for 8

assessment years immediately succeeding the
assessment year in which the loss was first
computed.

 Such loss can be carried forward unless return

is filed within the time limit of the section.
 Loss from such activities can be carried forward to a
subsequent year and set off only against income from
the business of owning and maintaining race horses.

 Loss can be carried forward for 4 assessment years

immediately succeeding the assessment year in which
the loss was first computed.

 Such loss cannot be carried forward unless return is

filed within the time limit of section 139(1).
Type of Loss to be carried Income against which carried Years
forward to the next year(s) forward loss can be set off in next
year(s)
HOUSE PROPERTY LOSS INCOME FROM HOUSE PROPERTY 8 YEARS.

SPECULATION LOSS SPECULATION PROFITS 4 YEARS.

NON SPECULATION BUSINESS
LOSS:
Unabsorbed Depreciation, ANY INCOME NO TIME
Scientific Research & Family LIMIT
Planning Expenditure
Other Business Losses SPECULATIVE AND NON SPECULATIVE 8 YEARS

SHORT TERM CAPITAL LOSS SHORT AND LONG TERM GAINS 8 YEARS
LONG TERM CAPITAL LOSS LONG TERM CAPITAL GAINS 8 YEARS
LOSS FROM ACTIVITY OF OWNING INCOME FROM SUCH ACTIVITY 4 YEARS
& MAINTAINING RACE HORSES
(Section 73) (Section 74A)
Speculation losses: Losses from horse
Units of UTI cannot races
be treated as Participation in races
shares. is not a
Apollo tyres requirement.
v/s CIT
CIT [2002] v/s
R.M.S & sons[2001]