Set Off and Carry Forward of Losses under section 70 to 80 of Income Tax Act

Summary: Sections 70 to 80 of the Income Tax Act, 1961, guide the set off and carry forward of losses across various income heads, allowing taxpayers to reduce taxable income. Income can be classified into five heads: salary, house property, business/profession, capital gains, and other sources, with no losses permissible under salary. Losses can be set off against the same income head (intra-head) or against other heads (inter-head), subject to specific rules.set For instance, losses from house property can be set off against any income up to ₹2 lakh annually. Business losses generally offset income from business/profession or other permissible heads, though certain business losses, such as those from speculative or specified businesses under section 35AD, may only be adjusted within the same head. Long-term capital losses can only be set off against long-term capital gains, while short-term capital losses can be offset against both short- and long-term gains. The Act sets specific carry-forward periods, typically eight years for many losses, such as business or capital losses, while speculative business losses and horse race maintenance losses have a four-year carry-forward limit. Some losses, like unabsorbed depreciation, may be carried forward indefinitely. The Act also mandates timely filing for losses to qualify for future offsets, enhancing compliance and clarity for taxpayers managing diverse income and loss scenarios.

Set off and Carry forward of losses as per section 70 to 80 of Income Tax Act, 1961

As per the Provision of Income Tax Act allow to Carry forward or Set- off losses against Income for saving the Tax

Under this Provision CBDT allow to deduction in 2 manner

1. Inter Head Adjustment (other House Adjustment)

2. Intra Head Adjustment (In House Adjustment)

Under the Income Tax income will be assessable in 5 Head

1. Income from Salary

2. Income from house Property

3. Income from Business and Profession

4. Income from Capital Gain

5. Income from Other Source

Note: Under Income from Salary no loss will be accrued any circumstances

Loss from House Property

Loss from Business and Profession

Certain business Loss***** Cannot be set off other Head

1. Loss from Speculative Business (Loss will be set off only In house Profit)

2. Loss from Specified Business as per u/s 35AD (Loss will be set off only in house Profit)

Loss from Capital Gain Head

A. Long Term Capital Loss

B. Short Term Capital Loss

Maximum Time Limit for Carried Forward Losses