Partial Set-Off of a Loss in Income Tax Return

POSTED BY jigneshdesai05 ON November 26, 2011 2:02 am COMMENTS (2)

Say ,following is the Income Details of an Assessee :

Income From Other Sources – Rs. 7,00,000
Business Loss – Rs. 3,00,000

Now , he wants to set off only Rs. 2,00,000 Business Loss from “Income From Other Sources” and carry forward Rs. 1,00,000 Business Loss to Future years . Can he do this ?

In short ,
(i) is it the choice of the Assessee how much of a Loss he wants to set off against Income for a particular year ?
(ii) or does he compulsorily have to set-off as much of the Loss as is possible in the year inwhich the Loss occurred ?
(iii) is the rule something different altogether from the above two points ?

2 replies on this article “Partial Set-Off of a Loss in Income Tax Return”

  1. Dear Jigneshdesai, being individual assessee, you can’t split the losses as per your choice.

    For the given example, the 3L Rs. loss has to be adjusted in the current year itself.



  2. An Individual assessee cannot carry forward losses to the next year without applying them in full for this year. However if even after applying there are more losses it can be carried forward upto 8 years. If your income is 7 lacs and your loss is 6 lacs you can take 5.1 lacs of the loss, bring down your income to 1.9 lacs, pay no tax and carry forward Rs. 90,000 loss to the next year.

    But if your loss is only 3 Lacs as in case above you HAVE to apply all of them – no choice!!

    Corporations, however, can carry forward losses in such fashion. It is a great tool for corporate earnings management – Deferred Tax assets and Deferred Tax liabilities!

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