Special Provisions of Set Off of Losses in case of an Individual or HUF who has opted to be Taxed as per Provisions of Section 115BAC

Here we discussed all Special Provisions of Set Off of Losses in case of an Individual or HUF who has opted to be Taxed as per Provisions of Section 115BAC

For the purpose of computing the total income, where an assessee being an Individual or HUF who has opted to be taxed as per the provisions of section 115BAC, the following special provision of Set Off of Loss and Unabsorbed Depreciation shall apply—

(a) (i)    no deduction on account of interest on loan taken for self-occupied residential house property shall be allowed while computing the income under the head ‘income from house property’.

(ii)        the total income shall be computed without set off of any loss under the head ‘income from house property’ with any other head of income in the same assessment year.

(b)        the total income shall be computed without set off of any loss carry forward or depreciation for any earlier assessment year, if such loss or depreciation is attributable to any of the following deductions:

(i)         Deduction available to SEZ unit under section 10AA.

(ii)        Additional depreciation under section 32(1)(iia) to an assessee engaged in the business of manufacture of any article or a thing or generation, transmission or distribution of power.

(iii)       Investment allowance of 15%  if new plant and machinery is installed in notified backward areas in certain States as per section 32AD.

(iv)       Deduction under section 33AB to an assessee engaged in the business of growing & manufacturing of Tea/Coffee/Rubber.

(v)        Deduction under section 33ABA on account of deposit in Site Restoration Fund.

(vi)       Deduction in respect of payment made to certain association/institutions for scientific research [Section 35(1)(ii)] or payment made to a company to be used for scientific research [Section 35(1)(iia)] or payment made to certain institutions for research in social sciences or statistical research [Section 35(1)(iii)] or payment made to a National Laboratory or a University or an Indian Institute of Technology [Section 35(2AA)].

(vii)      Deduction under section 35AD in respect of expenditure on specified business.

(viii)     Deduction under section 35CCC in respect of expenditure on agriculture extension project.

Loss and Depreciation referred to in Clause (b) above shall be deemed to have been given full effect to [Section 115BAC(3)]

The loss and depreciation referred to in clause (b) above shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year.

However, where there is a depreciation allowance in respect of a block of assets which has not been given full effect to prior to the assessment year beginning on 1.4.2022, corresponding adjustment shall be made to the written down value of such block of assets as on 1.4.2021 in the prescribed manner (see Notification No. 82/2020, dated 1.10.2020), if the option under section 115BAC(5) is exercised for a previous year relevant to the assessment year beginning on 1.4.2022.

Example :

Let us assume that the brought forward business loss and unabsorbed depreciation of earlier assessment years to be set off in this previous year, in case of R an individual, is Rs.3,00,000 and Rs.2,40,000 respectively. The brought forward loss includes the loss attributable to the following deductions claimed in the earlier years.

Further, brought forward unabsorbed depreciation includes Rs.1,30,000 on account of additional depreciation claimed in the past. Written down value of the asset as on 1.4.2021 is Rs.6,20,000.

In this example, the business loss which is allowed to be set off shall be Rs. 50,000 (i.e., Rs.3,00,000 — Rs.75,000 — Rs.40,000 — Rs.35,000) which are attributable to deductions on account of— (i) investment allowance (ii) donation to certain association/institutions for scientific research and expenditure on agriculture extension project.

Further, unabsorbed depreciation of Rs.2,40,000 — Rs.1,30,000 (on account of unabsorbed additional depreciation) = Rs.1,10,000 shall be allowed to be carried forward for set off and Rs.1,30,000 on account of unabsorbed additional depreciation shall be added to the written down value of the asset as on 1.4.2021.

Hence, the written down value of the asset for the purpose of claiming depreciation shall be Rs.6,20,000 + Rs.1,30,000 = Rs.7,50,000.