Set Off and Carry Forward of LossesKey PointsInter-source and Inter-head Set-off [Sections 70 & 71]Section Provision Exceptions70 Inter-source set-off under thesame head of incomeAny loss in respect of one sourceshall be set-off against incomefrom any other source under thesame head of income.(i) Loss from speculative business(ii) Loss from specified business undersection 35AD(iii) Long term capital loss and(iv) Loss from the activity of owningand maintaining race horses71 Inter head adjustmentLoss under one head of incomecan be set-off against incomeassessable under any other headof income.(i) Loss under the head “Profits andgains of business or profession”cannot be set off against incomeunder the head “Salaries”(ii) Loss under the head “Capitalgains” cannot be set-off againstincome under any other head.(iii) Speculation loss and loss from theactivity of owning and maintainingrace horses cannot be set-offagainst income under any otherhead.© The Institute of Chartered Accountants of India6.2 Income-taxCarry forward and Set-off of brought forward lossesSection Nature of loss to becarried forwardIncome against which thebrought forward loss canbe set-offMaximumpermissible period[from the end of therelevant assessmentyear] for carryforward of losses71B Unabsorbed loss fromhouse propertyIncome from house property 8 assessment years

72 Unabsorbed businesslossProfits and gains frombusiness or profession8 assessment years73 Loss from speculationbusinessIncome from speculationbusiness4 assessment years73A Loss from specifiedbusiness undersection 35ADProfit from any specifiedbusinessIndefinite period74 Long-term capital loss Long-term capital gains 8 assessment yearsShort-term capital loss Short-term/Long-term capitalgains8 assessment years74A Loss from the activityof owning andmaintaining racehorsesIncome from the activity ofowning and maintaining racehorses.4 assessment yearsOrder of set-off of losses1. Current year depreciation / Current year capital expenditure on scientific researchand current year expenditure on family planning, to the extent allowed.2. Brought forward loss from business/profession [Section 72(1)]3. Unabsorbed depreciation [Section 32(2)]4. Unabsorbed capital expenditure on scientific research [Section 35(4)].5. Unabsorbed expenditure on family planning [Section 36(1)(ix)]© The Institute of Chartered Accountants of India