Set off and Carry forward Losses                          

                                                                                                       Dr.G.VINCENT

 Set Off losses - Meaning

In simple meaning, "Deducting losses from income during the assessment year itself"

1)Intra head Adjustment

It means deducting losses of one head  from income of same head.

 Example:         Income from House Property

Income from House 1 -  Rs.50,000 

Loss from House -2 Rs. 20,000

 

 

House 1

50,000

House 2

-20,000

IFHP

30,000

 Exception to Intra-head Adjustment

Ø  Loss from speculative business can be deducted from income from speculation business only not from other business income

Ø  Loss from specified business can be set off against specified business profit only

Ø  Long term capital class can be deducted only from Long Term Capital Gain

Ø  Loss from horse race will have to be set off against profit from activities of maintaining horse races

 2) Intra-Head Adjustment

Inter means between. Inter head adjustment means “deducting losses of one head of income from profits and gains of another heads of income.

 

Rs.

Rs.

Salary Income

 

2,00,000

Income from House 1

 50,000

 

Loss from House 2

-80,000

-30,000

Gross Total Income

 

1,70,000

 Point to be remembered

 Ø  Any losses from house can be adjusted against any heads of income

Ø  Non-Speculative business loss can not  be set off against “Salary Income”.

Ø  Non-Speculative business loss can be set off against any heads of income except salary income. 

Losses that can’t be set off against other heads of income:

a)      Specified Business Losses u/s 35 AD

b)     Speculative business Losses

c)      Capital Losses

d)     Losses arising out of owing and maintaining horse races

 Carry forwarded losses

The losses which are not deducted from any other income during the assessment year, it is taken to the next Assessment Year (A.Y). This process is known as carry forward of losses.


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