Ayushi Tax Project

7/25/2019 Ayushi Tax Project

1/15

A PROJECT REPORT ON SET OFF OR CARRY FORWARD

LOSSES AN ANALYSIS

Submitted by: Submitted to:

Ayusi !"# R#$# $is%u &um'"

()*((+ T', L'- F'.u/ty

$II sem


2/15

AC&NOWLED0!ENT

I take this opportunity to express my profound gratitude and deep regards to my guide Mr

R.V.Vishnu Kumar for his guidance, monitoring and constant encouragement throughout the

course of this semester on project set off or carry forward losses an analysis!. "he #lessing,help and guidance gi$en #y him time to time ha$e only made it possi#le the successful

completion of the project.


3/15

TA1LE OF CONTENTS

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4/15

INTROD2CTION

"he pu#lic finance domain of conomics deals with principles:cannons of taxations. "here are

$arious models of "axation #ut in the de$eloping economies progressi$e system of taxation has

#een ad$ocated which means a person ha$ing larger income should contri#ute more to the pu#lic

exche;uer in comparison to the person ha$ing lesser income. 5hile dealing with the su#ject, it

has #een en$isaged that if a person has profits:income he should pay taxes if he has profit and

losses simultaneously he should pay tax on net profit after deducting the losses and if he has

resultant loss or only loss he is not re;uired to pay taxes. -owe$er, due to the complexity and

need it has #een thought of to incorporate the pro$isions relating to set off and carry forward of

losses. 2dditional complexity has #een created and the losses ha$e #een restricted to #e set off

due to greediness of the legislators and tax administrators.

If the losses could not #e set off under the same head or under different heads in the same

assessment year, such losses are allowed to #e carried forward to #e claimed as set off from the

income of the su#se;uent assessment years.

"he set off and carry forward of losses can #e su# di$ided into two #road categories. 0et off of losses.

?. )arry forward and 0et off of losses.

O1JECTI$E

"he o#jecti$e of this project is. Income from salaries

?. Income from house property

B. Income from #usiness or professionC. Income from capital gains

D. Income from other sources it is possi#le for an indi$idual to ha$e income under more

than one head. "he Income "ax 2ct has prescri#ed rules to set=off loss arising from one

head against other heads of income.>

STEPS IN$OL$ED IN SET OFF AND CARRY FORWARD LOSSES

0et=off means the process of reducing oneAs income using losses under other heads or same head

of income.

P"o.edu"e 6o" setti%8 o66 /osses. 0et=off loss from same head of income Inter source! adjustment 0tep ?. If the loss is

still existing, loss can #e set=off from other heads of income 6su#ject to certain restrictions9

Inter=head! adjustments 0tep B. If loss still persists, the same can #e carried forward to the

su#se;uent assessment years )arry forward of losses 0tep > = Inter source adjustment< (nder

each head of income mentioned, there may #e more than one source of income. 1or example, a

person can ha$e two or more #usinesses under the head E*usiness IncomeA. (nder the I" 2ct,

loss from one source of income can #e set=off against another source of income under the same

head i.e. 3oss from a cloth #usiness can #e set=off against gain in a catering #usiness. "he

restrictions to this form of setting off are as follows< a. 3oss from speculati$e #usiness can #e

set=off only against gain from speculati$e #usiness and not any other #usiness income. #. 3oss

from the acti$ity of owning and maintaining race horses can #e set=off only against gain arising

from the acti$ity of owning and maintaining race horses and not any other income. c. 3ong term

capital loss can #e set=off against long term capital gains and not short term capital gains. 0tep ?

= Inter head adjustment< If the losses cannot #e set=off fully through inter source adjustment, they

can next #e set=off against other heads of income. "his is called inter=head! adjustment. "he I"

2ct has prescri#ed specific rules setting off of losses #etween different heads of income, which

are summariFed in the following ta#lesD, 8


8/15

2ccording to section 7G, if there is a net result of loss from any source of income during any

assessment year the loss can #e set off against the income of any other source within same head

of income.

E,.e=tio%s:

>. 3oss from speculation #usiness.

?. 3ong term capital loss w.e.f 2 ?GGC.

B. 3oss from acti$ity of owning and maintaining race horses.

C. %o loss can #e set off against gains from winning from lotteries, crosswords, puFFles, card

games or other gam#ling.

Set o66 '8'i%st ote" e'ds o6 i%.ome o" i%t"' e'd set o66 se.tio% ;*, if there is a net result of loss in respect of any head of income during

any assessment year the loss can #e set off against the income of any other head of income.

xceptions. 3oss from speculation #usiness.

?. 3osses under head capital gains.

B. 3osses from the #usiness of owning and maintaining of race horses.

C. 3oss from #usiness:profession cannot #e set of against income under head salaries 6?GGD=GJ9.

D. 3oss from exempt income 6loss of profit must #e loss of taxa#le profit9.

J. %o loss can #e set off against gains from winning from lotteries, crosswords, puFFles, card

games or other gam#ling 6section D86C99.C

CARRY FORWARD AND SET OFF OF LOSSES#

4)2 R K 42(R, set off and carry forward of losses, accessed on >Dth&cto#er, ?G>D, C


9/15

If a loss cannot #e set off either under the same head or under the different heads due to

a#sence:ade;uacy of the income during the same year, such loss may #e carried forward to the

next year to #e set off against the income of that year. In the present context the losses can #e

carried forward to #e set off against the income e other su#se;uent year is possi#le in the

following heads of income. 3oss from house property.

?. 3oss from #usiness and profession7 th

&cto#er, ?G>D, B


10/15

tax under the head Income from house property!. 0uch loss can #e carried forward for eight

years immediately succeeding the year in which the loss is incurred. 3oss under the head

Income from house property! can #e carried forward e$en if the return of income:loss of the

year in which loss is incurred is not furnished on or #efore the due date of furnishing the return,

as prescri#ed under section >B6>9.

CARRY FORWARD AND SET OFF OF LOSSES OF 12SINESS AND PROFESSION:>

%on speculation #usiness7th

&cto#er,?G>D www.incometaxindia.go$.in,last accessed on >Jth&cto#er,?G>D.

www.raag$amdatt.com,accessed on >7th&cto#er, ?G>D.

www.kar$ydistri#ution.com,last accessed on >Gth&cto#er,?G>D.

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Ayushi Tax Project