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SET OFF OF LOSS "AGAINST SAME HEAD OF INCOME"

70. Set off of loss from one source against income from another source under the same head of income.

(1) Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income, other than "Capital gains", is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head.

(2) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset.

(3) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a short-term capital asset) is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset not being a short-term capital asset.

SECTION ANALYSIS

Set-off of Loss Against same Head of Income

Generally Loss araised under any Head of Income Can be set off against 'Same head of Income'. Say for Example Loss from House Property (House 1) can be set-off against Income from Other House (House 2). However there are Certain Exceptions for this Rule:

a) Loss from Speculative Business (Defined in section 43(5)) cannot be set-off against Other Business Gains. Such Speculative Loss Can be Set-off against Speculative Gain Only.

b)Long term Capital Losses Cannot be Set-off against Short term capital Gains . Such Long term Capital Losses can be Set -off against 'Long term Capital Gains'.

c)Loss from the Business of 'Owning and Maintaining 'race Horses' Cannot be set-off against Other Business Incomes. Such loss can be set-off against similar Income only.( section 74A ).

d) Loss on account of Lottery, crossword puzzles, card games Cannot be set-off any Income from Lottery or Crossword Puzzles, bettings etc , I.e Setting off of Loss under this Head is prohibited

e) Loss from specified business referred under section 35AD , like Business of cold chain facility, building and operating hotel, warehouse for storage of agricultural produce etc cannot be set-off other General Business Income . However loss from specified business can be set-off only against Gains from 'specified business' income only


TAX PLANNING

1) In general to be Noted that if Income is exempted from taxation under Income tax act then Loss for the same cannot be set-off or cannot be carried forward to further years for furture set-off .

say for example Long term capital gains araised from Sale of shares Listed on any stock exchange (I.e if shares are held for atleast one year before date of sale) are exempted from Taxation.

Since Long term capital Gains on listed shares are exempted , if any long term loss is araised on sale of listed shares then Such loss cannot be allowed to set-off or such loss cannot be carry forwarded.