Back Home Up Next
 

Set Off And Carry Forward of Losses

Sr. No.

Section

Types of Loss

Set Off against Income

Can be carried forward (subject to Notes 4 and 8) for

 

 

 

In same Assessment Year

In subsequent Assessment Year

 

1

71/72

Business or Profession (other than speculation or depreciation)

Any income under any head except Salaries

Business Income only (Note 1)

8 years

2

32(2)

Unabsorbed Depreciation

Any income under any head except Salaries

Any income under any head except Salaries

No restriction for of years number

3

73

Speculation Loss (See Note 2)

Speculation profit only

Speculation profit only

4 years [8 years up to A.Y. 2005-06]

4

70/74

Short-term Capital Loss r.w.s. 94(7) in respect units of mutual funds or UTI/ securities & 94(8) in respect units of mutual funds or UTI (Notes 7 & 8)

Any Capital Gain

Any Capital Gain

8 years

5

70/74

Long-term Capital Loss
(other than equity shares and units of equity oriented mutual fund which are subjected to STT)

Long-term Capital Gain

Long-term Capital Gain

8 years

6

71/74

Long-term Capital Loss on equity shares & units of equity oriented mutual fund which are subjected to STT (See Note10)

Not eligible for set off (See Note 10)

Not eligible for set off (See Note 10)

N.A.

7

74A

Loss from Owning and Maintaining race horses

Only against income from horse races

Only against income from horse races

4 years

8

71

Other Sources

Any income under any head of income

Unutilised loss not allowed for Carry Forward

N.A.

9

71B

House Property

Any income under any head of Income

Income from House Property

8 years

10

72A Rule 9C 72A(1)

In case of amalgamation

(a) Accumulated business losses of the Amalgamating company

See Note 14

See Note 14

Business Income of the Amalgamated company See Note 14

8 years from the expiry of the year of Amalgamation

 

72A(1)

(b) Unabsorbed Depreciation of the Amalgamating company

 

Any Income of the Amalgamated company

(See Note 14)

Indefinitely

11

72A

In case of Demerger 

See Note 15

See Note 15

 

 

72A(4)

(a) Accumulated business losses of the Demerged company

 

Business Income of the Resulting company (See Note 15)

Unexpired period out of total permissible period of 8 years

 

72A(4)

(b) Unabsorbed Depreciation of the Demerged company

 

Any Income of the Resulting company
(See Note 15)

Indefinitely

12

72A

In case of Firm/Proprietary Concern succeeded by company

Note 16

Note16

 

 

72A(6)

(a) Accumulated business losses of the Firm/Concern

 

Business Income of the Successor company

8 years from the expiry of the year of Conversion

 

72A(6)

(b) Unabsorbed Depreciation of the Firm/Concern

 

Any Income of the Successor company

Indefinitely

13.

72A(6A)

Conversion of private company Unlisted public company into LLP (w.e.f. AY 2011-12)

(a) Accumulated business losses (other than speculation loss) of such company

(b) Unabsorbed Depreciation of the Firm/Concern

Note 17

Note17


Business Income of the Successor LLP

Any Income of the Successor LLP

8 years from the expiry of the year of Conversion Indefinitely

13.

72AA

Amalgamation of Banking Company with Banking Institution w.e.f. A.Y. 2005-06

 

Accumulated loss

(other than speculation Loss) & unabsorbed Depreciation of amalgamating banking co. shall be deemed to be that of amalgamated banking institution (See Note 18)

a) 8 years from the expiry of the year of amalgamation in the case of accumulated loss.

b) Indefinitely in case of unabsorbed depreciation

14.

72AB(1)

Amalgamation of Co-op. banks

(w.e.f. A.Y. 2008-09)

 

Accumulated Loss & Unabsorbed Depreciation of amalgamating co-op. bank shall be deemed to be that of amalgamated co-op. bank (See Note 11)

a) 8 years from the expiry of the year of amalgamation in the case of accumulated loss

b) Indefinitely in case of unabsorbed depreciation

 

72 AB(3)

Demerger of Co-operative Bank

 

Accumulated loss & Unabsorbed Depreciation of demerged co-op. bank shall be allowed to be set off by resulting co-op bank (See Note 19)

a) 8 years from the expiry of the year of demerger in the case of accumulated loss b) Indefinitely in case of unabsorbed depreciation

 

35AD

Losses from specified business

 

Income from specified business

No time Limit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes

  1. From A.Y. 2000-01, conditions as to continuation of the same business in which the loss was incurred, has removed.

  2. Transactions of trading in derivatives entered into on recognised stock exchange through a broker, or SEBI recognised intermediary and supported by a time stamped contract note is excluded from the definition of speculative transaction u/s. 43(5)(d). Thus, loss from such transactions can be set off against any other income.

  3. Priority for set off of depreciation, business loss may be in the following order:

  • Current Year’s Depreciation

  • Unabsorbed Business Loss

  • Unabsorbed Depreciation

  1. In case of firm, where a change has occurred in the constitution of a firm, the firm shall not be entitled to carry forward and set off so much of the loss in proportionate to the share of a retired or deceased partner as exceeds his share of profits, if any, in the firm in respect of the previous year. However such restriction shall not be applicable where any person is succeeded by way of inheritance (Sec. 78).

  2. In case of company in which public are not substantially interested (i.e., closely held companies), Unabsorbed Loss relating to any assessment year can be carried forward and set off against income in a subsequent year only if on the last day of the previous year in which the loss is sought to be set off, the shares of the company carrying not less than 51% of voting power are beneficially held by the persons who beneficially held the shares of the company carrying not less than 51% of the voting power on the last day of the previous year in which the loss was incurred (Sec. 79).

  3. In terms of Section 80, the losses other than depreciation & house property loss can be carried forward only if determined in pursuance of the return filed within the time prescribed u/s. 139(1). However in case return is filed late CBDT has a power to condone delay – Circular No. 8/2001 dt 16-05-2001.

  4. As per section 94(7) if any person

— buys units of mutual funds/securities within the period of 3 months prior to record date for dividend; and

— transfers/sells such securities within 3 months of such record date or transfers/sells units within period of 9 months of such record date

— dividend or income received or receivable on such securities/units is exempt.

Then loss arising to the extent of the amount of dividend received or receivable shall be ignored while computing his total income.

  1. As per section 94(8) if any person

— buys units of mutual funds or UTI within the period of 3 months prior to record date for issue of bonus units and receives bonus units on such date

— transfers/sells all or any of the original units within period of 9 months of such record date

— he continues to hold all or any of the bonus units

Then loss arising in respect of such purchase & sale transaction shall be ignored while computing his total income. However loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional units as are held on the date of sale or transfer.

  1. Capital gain resulted from the transfer of an depreciable asset held for a period of more than three years, can be set off against the brought forward loss from the long-term capital assets.

  2. Long-term Capital Gains in respect of equity shares sold in recognised stock exchange and units of equity oriented mutual fund which has suffered Securities Transaction Tax (STT) are exempt u/s. 10(38) with effect from 1-10-2004. However long term gains is not exempt in case where STT is not paid on sale e.g. off market transactions, off market buyback, etc.

  3. Losses of the taxable long term capital gains to be set off only taxable long term capital gains and not against exempt long term capital gains. However set-off of indexed long-term capital loss can be set off against long-term capital gain without indexation.

  4. Provisions of s. 70 or 71 are applicable even in respect of loss incurred in business eligible for exemption e.g. u/s 10A, 10B, etc.

  5. Where S. 71 grants an option to an assessee for set off of any head of loss against any head of income then at the option of assessee such loss could be set off against respective income. E.g. where assessee has suffered loss under head ‘Business’ at his option such loss could be set off against ‘Income from other sources’, in first instance, and only surviving loss could be set off against ‘income from capital gains’.

  6. In case of Amalgamation, accumulated Loss and unabsorbed depreciation of Amalgamating (transferor) company can be transferred to Amalgamated (transferee) company, if

  1. Amalgamated company holds continuously ¾th value of assets acquired from Amalgamating Company for at least 5 years from date of Amalgamation.

  2. Amalgamated company continues to carry on the business of the amalgamating company for at least 5 years.

  3. The Amalgamated company shall achieve the level of production of at least 50% of the installed capacity of the said undertaking before the end of the four years from the date of amalgamation and continue to maintain the said minimum level of production till the end of 5 years from the date of amalgamation. However on application Central Government may relax this condition. The amalgamated company shall also furnish to assessing officer a certificate in Form No.63 providing prescribed production particulars, duly verified by chartered accountant. (Rule 9C).

  4. Amalgamating company has been engaged in the business, in which the accumulated loss occurred or depreciation remains unabsorbed, for 3 or more years.

  5. Amalgamating company has held continuously as on the date of amalgamation at least ¾th of the book value of fixed assets held by it 2 years prior to the date of amalgamation.

  1. In case of Demerger, accumulated loss and unabsorbed depreciation of Demerged Company can be transferred to Resulting Company:

  1. where such losses and depreciation is directly relatable to undertaking transferred, the whole of such losses or depreciation.

  2. where such losses and depreciation is not directly relatable to undertaking transferred then such losses and depreciation would be apportioned in ratio of assets retained by the Demerged Company and transferred to the Resulting Company.

  3. The Central Government may by a notification in Official Gazette, specify such conditions as it considers necessary to ensure that the demerger is for genuine business purposes.

  1. Carry forward and set off of loss incurred by the erstwhile Private company or unlisted public company is allowed only if conditions prescribed u/s 47(xiii) / 47(xiv) are complied. In case prescribed conditions are not complied set off of losses or allowance of depreciation in any previous year shall be income of the successor company.

  2. Carry forward and set off of loss incurred by the erstwhile partnership firm and proprietary concern is allowed only if conditions prescribed u/s 47(xiiib) are complied. In case prescribed conditions are not complied set off of losses or allowance of depreciation in any previous year shall be income of the successor LLP.

  3. (a) There is amalgamation of a banking company with any other banking institution.

(b) Amalgamation is sanctioned u/s 45(7) of Banking Regulation Act, 1949.

(c) Condition of secs. 72A/2(1B)(i)/(ii)/(iii) need not be satisfied.

  1. (a) The predecessor is engaged in banking business for 3 or more years.

(b) The predecessor bank has held ¾th of the book value of fixed assets as on the date of business reorganization, continuously for 2 years prior to the date of business reorganization.

(c) The successor holds ¾th of book value of fixed assets of the predecessor bank, continuously for minimum 5 years from the date of business reorganization.

(d) The successor continues the business of the predecessor bank, continuously for minimum 5 years from the date of business reorganization.

(e) The successor fulfils such other conditions as may be prescribed.


Back Home Up Next