Setoff and carry forward of losses
This query is : Resolved
25 February 2014
Whether loss of house property can be set off against the income of short term capital gain u/s 111A in the A.y 2010-11 for a Non Resident Individual?
Actually my cousin is NRI, and his source of income was stcg-111A Rs. 52603/- and ohter sources Rs. 125603/-, there was loss of HP Rs. 45306/- which is to be setoff u/s 71B. I had adjusted the loss against stcg but the IT dept has set the same against income from other sources and computed the tax on STCG-111A,
Whether I can do the same or not???
Actually my cousin is NRI, and his source of income was stcg-111A Rs. 52603/- and ohter sources Rs. 125603/-, there was loss of HP Rs. 45306/- which is to be setoff u/s 71B. I had adjusted the loss against stcg but the IT dept has set the same against income from other sources and computed the tax on STCG-111A,
Whether I can do the same or not???
25 February 2014
The assessee can set off loss under the head house property from any income including capital gain.
So the assessee can set off loss from STCG u/s 111A.
File a rectification application.
So the assessee can set off loss from STCG u/s 111A.
File a rectification application.
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26 February 2014
Sir, i had filled the same but again the demand is raised from IT dept, and there is also a limited space to explain the query while filling the rectification.
25 July 2025
In your case, you are dealing with the set-off of loss from house property against short-term capital gain (STCG) under Section 111A of the Income Tax Act, 1961.
1. Set-off of Loss from House Property:
According to Section 71(1) of the Income Tax Act, a loss under the head "House Property" can be set off against any other income of the taxpayer, including capital gains (both long-term and short-term).
In your case, you can set off the loss from house property (₹45,306) against STCG (₹52,603), which is subject to tax under Section 111A.
2. Issue in Your Case:
The Income Tax Department seems to have set off the loss from house property against income from other sources instead of against your short-term capital gain (STCG).
As per the Act, there is no restriction that prevents the loss from house property from being set off against STCG, even when the latter is taxed under Section 111A (which provides a concessional tax rate of 15%).
3. Steps to Correct the Mistake:
Since you have already filed a rectification request, but the demand was raised again, there may be an issue with how the rectification was processed. Here's what you can do next:
A. File Another Rectification Application (Online or Manually):
You can file a rectification application under Section 154 through the Income Tax e-filing portal.
When filing the application, make sure to select the correct options:
"Rectification under section 154".
Under "Category of Rectification", select the option that applies to set-off of losses or incorrect adjustment of the loss.
B. Mention Specific Query:
If the online portal restricts space, you may need to summarize the query. However, clearly mention:
Your cousin's status (Non-resident).
Details of income: STCG (₹52,603), Other Income (₹1,25,603), House Property Loss (₹45,306).
State that you are correctly entitled to set off the house property loss against STCG as per Section 71 and Section 111A.
Mention that the department has incorrectly adjusted the loss against income from other sources.
C. Attach Documents (if possible):
If the rectification portal allows attachments, attach the following documents:
Income Tax Return (ITR) filed for the relevant assessment year.
Computation of Income showing the set-off of the loss correctly against STCG.
D. Manual Representation (if required):
If the rectification request doesn't resolve the issue online, you may need to visit the Income Tax Office with a detailed written representation, explaining the correct set-off of loss and requesting a manual correction.
4. Why IT Department is Raising a Demand:
It is possible that the system is flagging the STCG under Section 111A and treating it as a special category of capital gain where losses under other heads might not be adjusted, which is incorrect according to the provisions of the Act. This is why manual intervention might be needed to resolve the issue.
5. Resolution Timeline:
Once the rectification application is filed, the department will typically process it within a few weeks, but it might take longer if there are complications.
If you do not receive a satisfactory response, you can also appeal the decision with the Commissioner of Income Tax (Appeals) under Section 246A.
6. Precaution for the Future:
Always ensure that you correctly set off losses in your ITR and keep detailed records, especially for capital gains and house property losses, to avoid issues during assessment.
1. Set-off of Loss from House Property:
According to Section 71(1) of the Income Tax Act, a loss under the head "House Property" can be set off against any other income of the taxpayer, including capital gains (both long-term and short-term).
In your case, you can set off the loss from house property (₹45,306) against STCG (₹52,603), which is subject to tax under Section 111A.
2. Issue in Your Case:
The Income Tax Department seems to have set off the loss from house property against income from other sources instead of against your short-term capital gain (STCG).
As per the Act, there is no restriction that prevents the loss from house property from being set off against STCG, even when the latter is taxed under Section 111A (which provides a concessional tax rate of 15%).
3. Steps to Correct the Mistake:
Since you have already filed a rectification request, but the demand was raised again, there may be an issue with how the rectification was processed. Here's what you can do next:
A. File Another Rectification Application (Online or Manually):
You can file a rectification application under Section 154 through the Income Tax e-filing portal.
When filing the application, make sure to select the correct options:
"Rectification under section 154".
Under "Category of Rectification", select the option that applies to set-off of losses or incorrect adjustment of the loss.
B. Mention Specific Query:
If the online portal restricts space, you may need to summarize the query. However, clearly mention:
Your cousin's status (Non-resident).
Details of income: STCG (₹52,603), Other Income (₹1,25,603), House Property Loss (₹45,306).
State that you are correctly entitled to set off the house property loss against STCG as per Section 71 and Section 111A.
Mention that the department has incorrectly adjusted the loss against income from other sources.
C. Attach Documents (if possible):
If the rectification portal allows attachments, attach the following documents:
Income Tax Return (ITR) filed for the relevant assessment year.
Computation of Income showing the set-off of the loss correctly against STCG.
D. Manual Representation (if required):
If the rectification request doesn't resolve the issue online, you may need to visit the Income Tax Office with a detailed written representation, explaining the correct set-off of loss and requesting a manual correction.
4. Why IT Department is Raising a Demand:
It is possible that the system is flagging the STCG under Section 111A and treating it as a special category of capital gain where losses under other heads might not be adjusted, which is incorrect according to the provisions of the Act. This is why manual intervention might be needed to resolve the issue.
5. Resolution Timeline:
Once the rectification application is filed, the department will typically process it within a few weeks, but it might take longer if there are complications.
If you do not receive a satisfactory response, you can also appeal the decision with the Commissioner of Income Tax (Appeals) under Section 246A.
6. Precaution for the Future:
Always ensure that you correctly set off losses in your ITR and keep detailed records, especially for capital gains and house property losses, to avoid issues during assessment.
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