Set-off of Losses
Set off of loss under the same head of income (Sec.70)
If the net result fro any assessment year in respect of any source under any head of income is a loss, the assessee is entitled to have the amount of such loss set off against the income from any other source under the same head of income. To the aforesaid rule, the following are the exceptions:
- Loss from Speculation Business: Loss in a Speculation Business can be set off only against the profit in a speculation business.
- Loss from a Specified Business: Any loss, computed in respect of any specified business referred to in section 35AD shall not be set off except against profits and gains, if any, of any other specified business.
- Long term capital loss: Long term capital loss can be set off only against long term capital gain.
- Loss from the activity of owning and maintaining race horses: Loss incurred in the business of owning and maintaining race horses cannot be set off against income, if any, from any other source except income from such business.
- Loss cannot be set off against winnings from lotteries, crossword puzzles, etc.,: A loss cannot be set off against winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature.
Barring the aforesaid cases, any other loss can be set off against any other income within the same head of income. For instance
- Loss from a house property can be set off against income from any other house property.
- Loss from a non-speculation business can be set off against income from speculation or non-speculation business.
- Short term capital loss can be set off against any capital gain (whether long term or short term)
- Under the head “Income from other sources” loss from an activity (other than activity of owning and maintaining race horses) can be set off against any income but other than income from winnings from lotteries, crossword puzzles etc.,
Set off of loss from one head against income from another head (Sec. 71):
Where the net result of computation made for any assessment year in respect of any head of income is a loss, the same can be set off against the income from other heads. To the aforesaid rule, the following are the exceptions and propositions:
- Loss in a speculation business cannot be set off against any other income
- Loss computed in respect of any specified business referred to in section 35AD cannot be set off against any other income.
- Loss under the head capital gains cannot be set off against income under other heads of income.
- Loss from business or profession cannot be set off against income under the head “Salaries”
- A loss cannot be set off against winnings from lotteries, crossword puzzles, races, card games and other games of any sort or from gambling or betting of any form or nature.
- Where income from a particular source is exempt from tax, loss from such a source cannot be set off against income chargeable to tax
