Default income tax regime restricts exemptions and loss set-offs while permitting eligible taxpayers to opt out under prescribed conditions.

Section 202 of the Income-tax Act, 2025 establishes a default tax regime for individuals, Hindu undivided families, associations of persons other than co-operative societies, bodies of individuals and specified artificial juridical persons. Carried-forward losses and depreciation attributable to the specified disallowed exemptions or deductions cannot be set off, and house property losses cannot be set off against income under another head. Taxpayers with business or professional income must exercise the opt-out by the applicable return-filing due date. Taxpayers without such income exercise the option with the return for the relevant tax year.

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