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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) mmfor

In same Assessment Year

In subsequent Assessment Year

1

71/72

Business or Profession(other than speculation or depreciation)

Business Income Head or any other head (other than salaries)

Business Income(Note 1)

8 years

2

32(2)

Unabsorbed Depreciation

Business Income or any other head

Business Income or any other head

Indefinitely

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 (Note 12 & 13)

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 Note 7) 

Not eligible for set off (See Note 7)

Not eligible for set off (See Note 7)

N.A.

7

74A

Loss from Owning and Maintaining race horses

Such income only

Such income only

4 years

8

71

Other Sources

Other Sources or any other income

No Carry Forward

N.A.

9

71B

House Property

Income from House Property or any other head of Income

Income from House Property

8 years

10

72A Rule 9C

In case of amalgamation(See Note 5)

See Note 5

See Note 5

 

72A(1)

(a) Accumulated business losses of the Amalgamating company

 

Business Income of the Amalgamated company
(See Note 5)

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 5)

Indefinitely

11

72A

In case of Demerger 
(See Note 6)

See Note 6

See Note 6

 

72A(4)

(a) Accumulated business losses of the Demerged company

 

Business Income of the Resulting company
(See Note 6)

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 6)

 Indefinitely

12

72A

In case of Firm/Prop. Concern succeeded by company

 

 

 

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.

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 10)

1. 8 years from  the expiry of the year of amalgamation in
the case of
accumulated loss.

2. 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)

1. 8 years from the expiry of the
year of
amalgamation in
the case of
accumulated loss

2. 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 6)

1. 8 years from
the expiry of the
year of
demerger in the
case of accumulated loss

2. Indefinitely in
case of
unabsorbed
depreciation

 

 

 

 

 

  
Notes

  1. From A.Y. 2000-01, there is no need to continue the same business in which the loss was incurred.

  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. The effect of depreciation, business loss and investment allowance should be given in the following order:

  • Current Year’s Depreciation

  • Unabsorbed Business loss

  • Unabsorbed Depreciation

  • Unabsorbed Investment Allowance.

  1. 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).

  2. In case of Amalgamation, accumulated Loss and unabsorbed depreciation of Amalgamating company can be transferred to Amalgamated company, if

  1. Amalgamated company holds continuously 3/4th 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. (Rule 9C).

  4. Amalgamated Company furnishes CA certificate in Form No. 62 (Rule 9C).

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

  6. 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.

  1. 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.

  2. 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).

  3. 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).

  4. (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 sec. 72A/2(1B)(i)/(ii)/(iii) need not be satisfied

  5. (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.

  6. 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.

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