Set-Off and Carry Forward of Losses

How to Set-off and carry forward the Income tax gain and loss. Loss from House property can set off against the other income. Short Term Loss can be set off against long term gain  and short term gain. Business loss can be set off against other business income only.

Heads

Set-off during the year

Set-off & carry forward

Same

Head

Another

Head

Against

C/f

Year

Profit

from

  1. House Property

Yes

Yes

– NA

Yes

8Yrs

Same

head

  1. Speculation Business

Yes

No

Against Speculation

Profit Only

Yes

4Yrs

Same Head

  1. Non-speculation Business

Yes

Yes

Any Business Profit

Yes

NO LIMIT

Same Head

  1. Long Term Capital Gain

Yes

No

Long Term Capital Gain Only

Yes

8Yrs

LTCG

  1. Short Term Capital Gain

Yes

No

Against Long Term & Short Term Gain

Yes

8Yrs

LTCG/STCG

  1. Owning/ Maintaining Race Horses

Yes

No

Against Income from Horse Racing Only

Yes

8Yrs

Same Income

  1. Income from other sources

Yes

Yes

– NA

No

4Yrs

NA

Carry Forward of Loss when there is Change in Constitution of Firm

Carry forward and set off of loss in the case of change in the constitution of firm:

Section 78, provides that where there is a change in the contribution of the firm on account of death/ retirement, the firm shall not be entitled to carry forward losses (case of retirement, death or goes out of the firm) as is attributable to such partner.

Carry forward of house property loss, business loss, capital loss and loss from the activity of owning and maintaining of horse races-

There loss can be set off and carried forward by a firm in the case of change in the constitution of the firm, as follows, as per the modified provision of section 78:

  1. Compute the share of outgoing partners in the profit or loss of the firm in the year of change in the constitution of the firm.
  2. Compute the share of loss of outgoing partner in the brought forward loss.
  3. The difference between the two is cannot be allowed to be carried forward and set off.

Carry forward of unabsorbed depreciation –

As section 78 is not applicable in case of unabsorbed depreciation, the entire unabsorbed depreciation (Without deducting share of outgoing partner) will be carried forward by the reconstituted firm.