1. Shankar Bose
Inspector of Income-tax
MSTU, Puri

2. 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.

3. 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.

4. X has two businesses – A & B.
Profit From Business A Rs. 500000
Loss From Business B Rs. 200000.
The Loss of Rs. 200000 can be set off with his Profit of Rs.
500000. Therefore the amount taxable under the head Profit &
Gains from Business will be (500000 – 200000) Rs. 300000.

7. 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.

8. 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.

10.  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.

11. 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.

12.  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.

14.  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.

15.  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.

16.  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 four 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).

17.  Loss can be carried forward for eight assessment
years.

18.  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.

19. 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, Scientific ANY INCOME NO TIME
Research & Family Planning LIMIT
Expenditure
Other Business Losses SPECULATIVE AND NON 8 YEARS
SPECULATIVE
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 INCOME FROM SUCH ACTIVITY 4 YEARS
OWNING & MAINTAINING RACE
HORSES