Set Off or Carry Forward of Losses

Under the Income Tax Act, brought forward losses must be set off against eligible income in the immediately succeeding years, subject to specific conditions. Here’s a structured breakdown: 1. Legal Requirement for Set-Off Section 72(1)(Business Losses) & Section 74 (Capital Losses) mandate that carried-forward losses must be adjusted at the first opportunity in subsequent years. No voluntary deferralis permitted—taxpayers cannot choose to […]

Section 115BAC of the Income Tax Act, 1961, introduces a simplified tax regime with lower slab rates but restricts many deductions ansd exemptions, including provisions for set-off and carry-forward of losses. Below is a detailed analysis of how losses are treated for individuals and HUFs opting for the new tax regime. 1. Key Restrictions on Loss Set-Off Under

Section 72A of the Income Tax Act, 1961, provides exceptional relief for companies undergoing restructuring (amalgamation, demerger, or reorganization) by allowing the carry forward and set-off of accumulated business losses and unabsorbed depreciation. This ensures that genuine business reorganizations do not result in the loss of tax benefits. Below is a detailed analysis: 1. Key Scenarios Covered Under

1. Set-Off Rules for Current Year Losses Intra-head adjustment (Section 70): Business losses can be set off against other business income of the same firm Example: Loss from manufacturing unit can offset profit from trading division Inter-head adjustment (Section 71): Unadjusted business losses can be set off against: Capital gains Income from other sources Cannot

Here’s a detailed explanation of Section 78(2) regarding carry forward and set-off of losses in case of succession: 1. General Rule for Succession [Section 78(2)] Normally, when a business is succeeded by another person (other than by inheritance), neither the predecessor nor successor can carry forward losses. This prevents artificial transfer of losses to new entities

Section 79 of the Income Tax Act, 1961, imposes strict restrictions on the carry-forward and set-off of losses in closely-held companies (private companies) when there is a change in shareholding. Here’s a detailed breakdown: 1. Applicability of Section 79 Applies only to closely-held companies(private limited companies). Does not apply to: Public limited companies listed on a recognized stock exchange. Government-owned companies.