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Salary Income Tax
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Set Off And Carry Forward Of Loss
Broad Steps

Step

Description

I

First calculate the Income/ Loss of the current year, after inter source adjustments in the current year as per Income Tax provisions.

II

After Inter source adjustments if still income exists, inter head adjustments should be done.

III

In case of Income/ loss after current year inter source & inter head adjustments the losses of prior years carried forward should be setoff against current year€™s income/ loss.

IV

If Income still remains after adjustment of Inter source, Inter head & Carry forward losses of earlier years, then such income will be chargeable to tax in the current year. However in case of a loss in current year same will be carried forward as per Income Tax Provisions.

CARRY FORWARD OF LOSSES:
If a loss cannot be setoff after all Inter Source & Inter Head Adjustments, then such loss can be carried forward to future years.

Summary of Provision for Set off and Carry Forward Losses:

Section

Description

Provision for Set off Loss

Provision for Carry Forward Loss

71

Set off of loss of Current Previous year one source of income with another source of income.

Except Long-Term Capital Loss or Loss from Owning and Maintaining race horses.

71B

Loss from House Property

Loss from House Property Set off against any head income.

Loss from House Property Carry forward up to 8 Assessment Years.

72

Business loss.

Business loss Setoff against any other head of Income except Salary Income.

Business losses carry forward up to 8 Assessment Years.

74

Loss From Capital Gain:

  • Short Term Capital Loss

 

  • Long Term Capital Loss
  • Short Term Capital Loss setoff with only against Capital Gain (Long Term/ Short Term).
  • Long Term Capital Loss setoff with only against Long Term Capital Gain
  • Short Term Capital Loss carry forward up to 8 Assessment Years.

 

  • Long Term Capital Loss carry forward up to 8 Assessment Years.

74B

Loss cannot be set off against winnings from lotteries, crossword puzzles etc.

A loss under any head of income cannot be set off against winnings from lotteries, crossword puzzles, races (including horse races), card games or any other games of any sort or from gambling or betting of any form or nature.

 

Carry forward up to 4 Assessment Years.

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