Set off of loss from one head against income from another head (Inter-Head Adjustment) - (New) Section 109 / (Old) Section 71

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....in accordance with the Act; • the computation results in a loss; and • the loss does not arise under the head "Capital gains (a) Prohibition on Adjustment of Business Loss Against Salary Income Clause (a) creates an important exception to the general rule contained in sub-section (1). Although business loss can generally be adjusted against income under other heads, salary income is specifically excluded. • Business loss cannot reduce taxable salary income. • Salary income remains fully taxable despite business losses. • The business loss may instead be adjusted against: • Income from House Property • Capital Gains • Income from ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s must be satisfied: • There should be a loss under one head of income. • The loss should not be under the head Capital Gains. • There should be no income under Capital Gains. • The assessee should have income under another head. • No other restrictive provision of Chapter VI should prohibit such adjustment. Inter-head Set-off of Non-Capital Loss Against Capital Gains and Other Income [ Section 71(2) ] • Where in respect of any assessment year, • the net result of the computation under any head of income is a loss, other than "Capital gains" and • the assessee has income assessable under the head "Capital gains", such loss may be set o....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....oss [ Section 71(3A) ] • Notwithstanding anything contained in section 71(1) or (2), • where in respect of any assessment year, the net result of the computation under the head "Income from house property" is a loss and • the assessee has income assessable under any other head of income, • the assessee shall not be entitled to set off such loss, to the extent the amount of the loss exceeds two lakh rupees, against income under the other head. Other Point It means loss under one head of income can be set off against income from another head of income but in the same previous year. Exceptions: - • Speculative business loss can be set off against only speculative in....