Income Tax Loss Set Off And Carry Forward Provision

 Given Information - *Loss from House Property*: ₹2,50,000 -

*Income from Salary*: ₹50,000 - *Long-term Capital Gain*: ₹2,50,000

- *Long-term Capital Loss*: ₹2,00,000 - *Short-term Capital Loss*: ₹50,000 Calculating Net Capital Gains -

*Net Long-term Capital Gain*: ₹2,50,000 (long-term capital gain) - ₹2,00,000 (long-term capital loss) = ₹50,000 -

 *Net Short-term Capital Loss*: ₹50,000 (short-term capital loss) Setting Off Losses -

 *Inter-head Setoff*: Losses from house property can be set off against income from other heads, but there are restrictions on setting off capital losses against income from house property. -

*Long-term Capital Loss*: Long-term capital loss cannot be used to set off income from house property.

Calculating Taxable Income - *Income from Salary*: ₹50,000 -

*Net Long-term Capital Gain*: ₹50,000 - *Loss from House Property*: ₹2,50,000 (can be carried forward for setoff against future income from house property) Answers to Questions

 Q1. *Amount of Loss to be Carried Forward*: ₹2,50,000 (loss from house property)

Q2. *Taxable Income*: ₹50,000 (income from salary) + ₹50,000 (net long-term capital gain) = ₹1,00,000

 Q3. *Long-term Capital Loss*: Cannot be used to set off income from house property.

 Q4. *Amount of House Property Loss for Inter-head Setoff*: ₹0 (loss from house property cannot be set off against other heads of income, but can be carried forward for setoff against future income from house property)

Assuming the figures are for the same assessment year, the ₹2,50,000 house-property loss is a loss under the head “Income from house property,” and the capital gains/losses are otherwise eligible for set-off:

• Q1—Loss carried forward: ₹2,00,000 house-property loss. The current-year inter-head set-off of house-property loss is capped at ₹2,00,000. The capital losses are fully set off against the eligible long-term capital gain: ₹2,00,000 LTCL first, then ₹50,000 STCL. No capital loss remains to carry forward.
• Q2—Taxable income: ₹50,000 salary income. The ₹2,50,000 LTCG is fully absorbed by capital losses; the house-property loss reduces other heads by ₹2,00,000, with the balance carried forward. This assumes the ₹50,000 salary figure is income after any applicable standard deduction and that no other income/deductions apply.
• Q3—Can LTCL be set off against house-property income? No. Long-term capital loss can be set off only against long-term capital gains.
• Q4—House-property loss available for inter-head set-off: Up to ₹2,00,000 in the current year. The balance of ₹50,000 is carried forward for set-off against house-property income in subsequent years, subject to the applicable rules. The tax regime chosen and the nature of the house-property loss can affect the result.

This set-off sequence is useful when preparing the return and reconciling losses carried forward across heads. Manual loss tracking is difficult, and automation can reduce repetitive calculations while leaving tax treatment and review under professional judgment. At Jir AI we provide 2,000+ AI agents and 650+ integrations to streamline your practice’s day-to-day workload. WhatsApp us to explore a workflow for your practice: https://wa.me/message/3HVOZ7HIY4ESC1