Set off can carry forward simplified

CA Pallav Singhania (❤ Work Hard Party Harder ❤)   (32532 Points)

13 October 2013  

Section

Types of Loss                                                         

Set Off against Income

In same Assessment Year

Set Off against Income

In subsequent Assessment Year

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

71/72

Business or Profession (other than speculation or depreciation)

Any income under any head except Salaries

Business Income only (Note 1)

8 years

32(2)

Unabsorbed Depreciation

Any income under any head except Salaries

Any income under any head except Salaries

No restriction for of years number

73

Speculation Loss (See Note 2)

Speculation profit only

Speculation profit only

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

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

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

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.

74A

Loss from Owning and Maintaining race horses

Only against income from horse races

Only against income from horse races

4 years

71

Other Sources

Any income under any head of income

Unutilised loss not allowed for Carry Forward

N.A.

71B

House Property

Any income under any head of Income

Income from House Property

8 years

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.

 

regards,