This document discusses the concept of setoff of losses in India. It provides that an assessee can adjust losses from one source of income against profits from other sources within the same head of income under section 70. It also allows adjusting losses against income under different heads of income under section 71. Some exceptions are losses from speculation business, specified business, race horse ownership, and lotteries. Inter-source and inter-head adjustments help ascertain an assessee's true tax liability by allowing losses incurred in one stream to offset profits in another.

1. Setoff ofSetoff of
losseslosses
Presented by,Presented by,
Morteza.AMorteza.A
22ndnd
sem M.F.Msem M.F.M
Manasa GangothriManasa Gangothri
MysoreMysore..

2. Setoff of lossesSetoff of losses
This provides us to know theThis provides us to know the
provision for adjusting the lossesprovision for adjusting the losses
against profit.against profit.

3. Meaning of setoff of lossesMeaning of setoff of losses
If an assesses gets lossIf an assesses gets loss
from a source of income he willfrom a source of income he will
be allowed to setoff it againstbe allowed to setoff it against
other incomes beforeother incomes before
ascertaining tax liability isascertaining tax liability is
known as “setoff of losses”.known as “setoff of losses”.

4. ProvisionsProvisions regarding setoff ofregarding setoff of
losseslosses
• Inter-source adjustments u/s 70Inter-source adjustments u/s 70
• Inter-headInter-head adjustment u/s 71adjustment u/s 71

5. Inter sources adjustment u/s 70Inter sources adjustment u/s 70
An assesses will be allowed toAn assesses will be allowed to
setoff any loss from one source of asetoff any loss from one source of a
particular head against profit fromparticular head against profit from
other source under the same head.other source under the same head.

6. IllustratedIllustrated
(income) (loss)(income) (loss)
Rs 3.5 lakh Rs 1 lakhRs 3.5 lakh Rs 1 lakh
In this case, loss of Rs 1 lakh fromIn this case, loss of Rs 1 lakh from
business B can be setoff against incomebusiness B can be setoff against income
of Rs 3.5 lakhof Rs 3.5 lakh
Mr.X
A business B business

7. Exceptions to the aforesaid rulesExceptions to the aforesaid rules
• Loss from speculation businessLoss from speculation business
• Loss from any specified businessLoss from any specified business
• Loss from the activity of owning andLoss from the activity of owning and
maintaining race horsesmaintaining race horses
• Long term capital lossLong term capital loss
• Loss occurred from winning fromLoss occurred from winning from
lotteries, crossword , puzzles etclotteries, crossword , puzzles etc

8. Other pointsOther points
• Loss from a house propertyLoss from a house property
• Loss from a non-speculativeLoss from a non-speculative
businessbusiness
• Short term capital lossShort term capital loss

9. IllustratedIllustrated
Capital asset
Which is
transferred
A B C
Short-term
Rs.
Long-term
Rs.
Short-term
Rs
Long-term
RS
Short-term
Rs.
Long-term
Rs.
P
Q
R
S
2,50,000
(-)90,000
4,00,000
(-)3,80,000
4,60,000
(-)4,90,000
80,000
(-)15,000
3,12,000
(-)80,000
5,56,00
(-)5,90,000
Total 1,60,000 20,000 (-)30,000 65,000 2,32,000 (-)34,000

10. Inter head adjustment u/s 71Inter head adjustment u/s 71
If an assesses can’t setoff lossIf an assesses can’t setoff loss
from a particular source under thefrom a particular source under the
same head, he can setoff that losssame head, he can setoff that loss
against incomes under other heads.against incomes under other heads.

11. IllustratedIllustrated
Business income
Rs
Property income
Rs
Business A
Business B
Income from house property
(-)2,90,000
70,000
5,10,000
Total (-)2,20,000 5,10,000

12. ExceptionsExceptions
• Loss in speculation businessLoss in speculation business
• Loss in specified businessLoss in specified business
• Loss under the head capital gainsLoss under the head capital gains
• Loss from the activity of owing andLoss from the activity of owing and
maintaining race horsesmaintaining race horses
• Loss can’t be setoff against winningLoss can’t be setoff against winning
lotterylottery
• Loss from businessLoss from business

13. Presented to,Presented to,
Dr. Mahadevappa,Dr. Mahadevappa,
Dos of commerce,Dos of commerce,
Manasa gangothri,Manasa gangothri,
Mysore.Mysore.

14. Thank you,Thank you,
For being such aFor being such a
good audiencegood audience..