§§70-74 — Set-off and carry-forward of losses

Losses are first set off WITHIN the same head (§70), then ACROSS heads (§71). Unabsorbed losses carry forward: BUSINESS loss 8 years (vs business income), SPECULATION 4 years, CAPITAL loss 8 years (LTCL only vs LTCG; STCL vs either), HOUSE-PROPERTY loss 8 years. Carry-forward needs the return filed by the §139(1) due date.

Key points

• §70 — INTRA-HEAD set-off: a loss under one source is set off against income from another source under the SAME head (exceptions: long-term capital loss only against long-term capital gain;
• speculation loss only against speculation).
• §71 — INTER-HEAD set-off: a loss under one head may be set off against income under another head in the SAME year, EXCEPT (a) business loss cannot be set off against SALARY;
• (b) capital loss cannot be set off against any non-capital head;
• (c) HOUSE-PROPERTY loss set off against other heads is capped at ₹2,00,000 per year (§71(3A));
• (d) speculation / §58 losses are ring-fenced.
• CARRY-FORWARD: §72 — unabsorbed BUSINESS loss carries forward 8 ASSESSMENT YEARS, set off only against business income;
• §73 — SPECULATION loss carries forward 4 years (only vs speculation);
• §73A — specified-business (§35AD) loss indefinitely;
• §74 — CAPITAL loss carries forward 8 years, with SHORT-TERM capital loss set off against STCG or LTCG but LONG-TERM capital loss only against LTCG;
• §74A — race-horse loss 4 years.
• UNABSORBED DEPRECIATION (§32(2)) carries forward INDEFINITELY and is not subject to the return-filing condition.
• CONDITION: except house-property loss and unabsorbed depreciation, carry-forward of a loss requires the return to be FILED WITHIN the §139(1) due date.

Reference: §§70-74 read with §32(2) & §139(3), ITA 1961