These Slides will helpful for students know about clubbing of income and set off and carry forward of loss

1. Presentation By
Basavanagouda
Research Scholar
Department of Commerce,
CUK
CLUBBING OF INCOME AND SET
OFF AND CARRY FORWARD OF
LOSSES

2. CLUBBING OF INCOME
 Section 60 to section 65
 Income of the other person is included in the
income of the assesses

3. Situations in case of clubbing of Income
Transfer of income without
transfer of Asset (Section 60)
• Revocable transfer is generally a transfer in
which the transferor directly or indirectly exercises
control/right over the asset transferred or over
the income from the asset.
Income arising form Revocable
transfer of asset (Sec 61)
• Substantial interest refers to holding of at least 20%
of the voting Rights
Income by way of Remuneration
from a concern in which individual
has substantial interest (Section
64(1)(2)Income arising to Spouse from an asset
transferred without adequate consideration
Section 64(1) (4) – other then House
property
Transfer of asset for the benefit of
spouse Section 64(1) (7)
Income arising to sons wife from the assets
transferred without adequate consideration by
the father-in-law or mother-in-law Section 64(1)
(6)
Transfer of asset for the benefit of
sons wife Section 64(1) (8)

4. CLUBBING OF MINIORS INCOME (Sec 64
(1A)
All Income of the minor is
included in the income of his
parent.
The income of the minor will
be included in the income of
that parent, whose income is
greater.
It will continued to be
included in that parent
income
Sec 10 (32) exemption in
respect of clubbed income of
minor
1500 exemption in respect of
each minor child. However, if
the income is less than 1500
so entire amount is exempt
from tax.

5. Cross Transfers
Transfers with the
Mutual understanding
Conversation of self
occupied Property into
property of Hindu
undivided family (
Section 64 (2) )
• INCOME INCLUDES LOSS
The income mentioned under section 64 (1) and section 64
(2) would also
include loss as per explanations given. Cases wherein the
specified
income derived is a loss then such loss should be taken into
account while
calculating the total income of the individual.

6. Set off of Losses
•Inter Source adjustment (Section 70)
•Inter Head adjustment (Section 71)
CARRY FORWARD OF BUSINESS
LOSSES
(SECTION 72 AND SECTION 80)

7. Steps to Set off of losses
Step1: Intra source adjustment
Step2: Inter–head Adjustment
Step3: Carry forward of loss only if a loss cannot be
set of under Step1 and step 2
 However, Inter source set off is not permissible
under following cases
Long term capital loss (Section 70(3))
 Short term capital loss is allowed to be set off against both
the short term capital gain and long term capital gain. However,
long term capital loss can be set-off only against long term
capital gain.

8. •Speculation loss (section 73(1))
Note: Losses from other business can be adjusted
against Profits from speculation business.
• Loss from owning and
maintaining of race horses
(Section 74 A (3))
•Loss from Specified business
(Section 73A(1))
Note: Specified Business Specified us Sec 35AD

9. INTER HEAD ADJUSTMENT
(Section 71)
 Loss under one head of income can be adjusted or set off
against income under another head.
I. Note: where the net results of the computation under
any head of income (other than ‘capital gains’) is a loss,
the assesses can set off such loss against his income
assessable for that assessment year under any head,
including capital gains.
II. Profit and gains of business and profession loss can not
be setoff against income from “salaries”.
III. Capital gain loss that loss can not set-off against income
under any other head.
IV. Maximum loss from house property which can be set-off
against income from any other head is Rs. 2 Lakhs.
V. Speculation loss , loss from the activity of owning and
maintaining of race horse and loss from specified
business (sec 35AD) cannot be set off against income
under any other head.

10. SET OFF AND CARRY FORWARD OF LOSSES
FROM HOUSE PROPERTY(SEC 71B)
 Up to 2lakh is set off against any head of income during the
same year. Unabsorbed loss will be carried forward to fallowing
assessment year to be set off against same head only. Loss can
be carried forward up to 8 assessment years immediately
succeeding assessment year in which loss was first computed.
 It is to be Remembered that once particular loss is carried
forward , it can be only set off against the income from same
head in forthcoming assessment years.
SET OFF AND CARRY FORWARD BUSINESS
LOSSES (SEC 72 & 80)
 The successor of the business can not carry forward
or set off losses of his predecessor except in case
succession by inheritance.
 A business loss can be carried forward for a
maximum period of 8 assessment years.

11. Set off and carry forward of accumulated loss
and/or unabsorbed Depreciation in Amalgamation
(Sec 72A)
 Conditions to carry forward of losses
1. Company owning an industrial undertaking or
ship or a hotel with another company; or
2. Amalgamation of a public sector company or a
company engaged in the business of operating
aircraft with another public sector company or
company engaged in similar business; or
3. Amalgamation of a banking company with a
specified bank.

12.  Amalgamated company has to fulfill the following
conditions to avail the benefit:
1. It continuously holds 75% of the book value of the fixed assets
acquired in a scheme of amalgamation for at least five years from
the date of amalgamation
2. It continues to carry on business of amalgamating company for at
least five years from the date of amalgamation
3. It achieves at least the level of 50% of the installed capacity before
the end of 4 years from the date of amalgamation and maintains that
level till the 5th year
 Amalgamating company has to fulfill the following
conditions:
1. It was engaged in the business in which the accumulated loss has
occurred or the unabsorbed depreciation remains unabsorbed for
three or more years.
2. It has continuously held 75% of the book value of fixed assets held
by it two years prior to amalgamation.

13. SET OFF AND CARRY FORWARD OF LOSSES IN
SPECULATION BUSINESS (SEC 73)
 Loss from speculation business neither set off in the
same year against any other non-speculation income
nor can be carried forward and set of against other
income in the subsequent years.
 Speculation business is exclusive area it cannot be
set off with any other source of income.
SET OFF AND CARRY FORWARD OF LOSSES IN
SPECIFIED BUSINESS (SEC 73A)
 Loss from specified business shall be set off only
against profits and gains of other specified business
gains only. Losses can be carried forward to
indefinite numbers of years for set off against income
form specified business only.
 Return of income is must in case of carry forward of

14. SET OFF AND CARRY FORWARD OF LOSSES ACTIVITY
OF OWNING AND MAINTAINING OF RACE HORSES (SEC
74A(3))
 Short term capital loss can be set off against any
capital gains.
 Long term capital loss only set off against only
long term capital gain only.
 Net loss under the head capital gains cannot be
set off against income under any other head.
 Any unabsorbed losses can be carried forward to
the 8 assessment years.
SET OFF AND CARRY FORWARD OF
LOSSES CAPITAL GAINS (SEC 74)
 Losses can be carried forward for a maximum
period of 4 assessment years.

15. Order of Set off and carry forward of
losses
 As per the provision of section 72(2) brought forward
business loss is to be set-off before setting off
unabsorbed depreciation. Therefore the order in
which set-off will be effected is as follows.
1. Current year depreciation/Current year capital
expenditure on scientific research and current year
expenditure on family planning, to the extent
allowed.
2. Brought forward loss from business/ Profession
(Section 72 (1))
3. Unabsorbed depreciation (Section 32(2))
4. Unabsorbed Capital Expenditure on scientific
research (section 35(4) )
5. Unabsorbed capital expenditure on family planning
(sec 36 (1) (ix))