Set-off and carry forward of losses: Contents: Set-off of Losses Inter Head Adjustments Exceptions Carry Forward of Losses Mode of Set-off & Carry Forward InterSource Adjustment (Sec 70) Inter Head Adjustment (SEC 71) Carry Forward & Set off of Speculation Loss Carry Forward & Set-off of Speculation Loss Carry forward of unabsorbed Depreciation (Sec 32(2)) Carry forward & set-off of loss from the activity of owning & maintaining racehorses (sec 74a) Order of set-off of Business Loss

1. SET-OFF & CARRY FORWARD OF LOSSES
Dr. P.Revathi
Assistant Professor (SG) and Head
Department of Commerce Banking and Insurance
Dr. N.G.P. Arts and Science College
Dr. N.G.P.-Kalapatti road
Coimbatore-641 048
Tamil Nadu, India
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2. Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India
CONTENTS
 Set-off of Losses
 Inter Head Adjustments Exceptions
 Carry Forward of Losses
 Mode of Set off & Carry Forward
 Inter Source Adjustment (Sec 70)
 Inter Head Adjustment (SEC 71)
 Carry Forward & Set off of Speculation Loss
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Contd…

3. Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India
CONTENTS
 Carry Forward & Set-off of Speculation Loss
 Carry forward of unabsorbed Depreciation
(Sec 32(2))
 Carry forward & set-off of loss from activity of
owning & maintaining race horses (sec 74a)
 Order of set off of Business Loss
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4. SET -OFF OF LOSSES
 Inter Source set off
Set-off of losses of one source of income
from another source except
-Speculation loss
-Long term capital loss
-Expenses of maintaining horses for
race purpose
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Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India

5. SET-OFF OF LOSSES
- Speculation loss only from
speculation gain
-Expenses of maintaining horses
for race purpose only from Race
winnings.
 Inter head set off:
- Loss from one head set-off against
another heads of income
- Subject to the Exceptions
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Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India

6. INTER HEAD ADJUSTMENTS EXCEPTIONS
 Speculation Loss
 Loss from owning and maintaining race horse
 Business cannot be set-off against Salary income
 Loss from House property can be setoff only against
other head upto Rs.2,00,000
 No loss can be set-off against casual incomes.
 STCL can be set-off against LTCG and STCG
 LTCL can be set-off only against LTCG
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Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India

7. CARRY FORWARD OF LOSS
 Loss under head Income from ‘House Property’
(Sec 71B)
 Loss under head ‘Profit & Gains of Business or
Profession’ (Sec 72 & Sec 73)
 Loss under the head ‘Capital Gains’ (Sec 74)
 Loss from activity of owning & maintaining race
horses (Sec 74A)
Other remaining losses cannot be carried
forward.
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Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India

8. MODE OF SET OFF & CARRY FORWARD
Types of Loss Set -off Against No. of Years
Loss from House Property Current Year – Any Heads
of Income
Carry Forward – Only from
House Property Income
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Business Loss Any Business Income 8
Loss from Specified
business u/s 35 AD
Specified business only Indefinite
Periods
Unabsorbed Depreciation Any Income Till it gets Fully
adjusted
Speculation loss Speculation Profit 4
Long Term Capital Loss Only against Long Term
Capital Gain
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Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India

9. MODE OF SET OFF & CARRY FORWARD
Types of Loss Set-off Against No. of Years
Short term Capital Loss Short term Capital Gain/
Long Term Capital Gain
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Speculation loss Speculation Profit 4
Expenses on maintenance
of Race Horses
Income from same
activity
4
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Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India

10. INTER SOURCE ADJUSTMENT (SEC 70)
Business A 100000
Business B 70000
Business C (120000)
Net Result 50000
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Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India
House Property X 75000
House Property Y (40000)
Net Result 35000

11. INTER HEAD ADJUSTMENT (SEC 71)
When there is loss in respect of any head of
income for any assessment year then it can
be set-off against income from other heads
EXAMPLE :
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Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India
Salary Income 80000
House Property (30000)
Net Result 50000

12. CARRY FORWARD & SET-OFF OF
SPECULATION LOSS
 Speculation loss can be set-off only
against speculative income
 Loss can be carried forward for 4 yrs.
 Continuity of business not necessary.
 Filing of Return of loss should be
submitted in time
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Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India

13. CARRY FORWARD OF UNABSORBED
DEPRECIATION (SEC 32(2))
 No time limit is fixed for the purpose of carry
forward.
 In the subsequent year(s) it can be set off
against any head. except winnings from
lotteries, crossword puzzles & Salaries
 Continuity of business not relevant.
 Following order of priority is followed.
(1) Current Depreciation
(2) Brought Forward Business loss
(3) Unabsorbed Depreciation
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Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India

14. CARRY FORWARD & SET -OFF OF LOSS FROM
ACTIVITY OF OWNING & MAINTAINING RACE
HORSES (SEC 74A)
 Continuity of Business necessary
 Loss can be carried forward for 4 yrs
 Return of loss should be submitted in time
 Not applicable for other race animals
 Allowed only to the extent of stake falls short
of revenue expenditure
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Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India

15. ORDER OF SET-OFF OF BUSINESS LOSS
i. Current Year Depreciation
ii. Capital Expenditure on Scientific Research
iii. Current loss of any business
iv. Brought forward Business loss
v. B/F Unabsorbed Depreciation
vi. B/F Capital Expenditure on Scientific
Research
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Dr.N.G.P. Arts and Science College
Coimbatore,Tamil Nadu, India

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