What are the provisions framed under the Income tax law/Act in relation to carry forward and set off of business loss other than loss from speculative business?
If loss of any business of profession (other than speculative business) cannot be fully adjusted in the year in which it is incurred, then the unadjusted loss can be carried forward for making adjustment in the next year. In the subsequent year(s) such loss can be adjusted only against income charged to Income tax under the head “Profits and gains of business or profession”.
Loss under the head “Profits and gains of business or profession” can be carried forward only if the Income Tax return of income and loss of the year in which loss is incurred is furnished on or before the due date of furnishing the return, as prescribed under section 139(1) of income tax act.
Such loss can be carried forward for 8 years immediately succeeding the year in which the loss is incurred.
Above provisions (set off of business loss other than loss ) are not applicable in case of unabsorbed depreciation (provisions relating to unabsorbed depreciation are discussed later).
- Loss from business specified under section 35ad of income tax act cannot be set off against any other income except income from specified business section 35ad of Income Tax Act 1961 is applicable in respect of certain specified businesses like setting up a cold chain facility, setting up and operating warehousing facility for storage of agricultural produce, developing and building a housing projects, etc.). Such loss can be carried forward for adjustment against income from specified business for any number of years.
- Loss from Specified business under section 35ad of income tax act cannot be carried forward unless it has been determined in pursuance of return filed in accordance with the provisions of section 139(1) of income tax act.
- Loss from the business of owning and maintaining race horses (speculative business) cannot be set off against any income other than income from the business of owning and maintaining race horses. Such loss can be carried forward only for a period of 4 (four) years.
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