Deductions from Gross Total Income now constrained by non-duplication and market-value rules, tightening tax compliance obligations.
Clause 122 governs deductions from gross total income by capping aggregate deductions at gross total income, prohibiting duplication of deductions between entity and member levels, restricting multiple claims under different provisions, conditioning deductions on timely filing and claiming in the return, and requiring inter-business transfers to be recorded at market value; it also defines gross total income for deduction purposes.

Filing requirement for loss carryforward: procedural return submission determines eligibility to set off future taxable income.
Only losses determined pursuant to a return filed under the prescribed statutory procedure qualify for carry forward and set off; Clause 121 conditions eligibility on a return filed under Section 263(1) while Section 80 conditions it on a return filed under Section 139(3), each referencing the statutory provisions that define eligible loss categories and thereby tying substantive loss recognition to procedural compliance.

Disallowing set off of losses against undisclosed income prevents offset after tax searches, requisitions, or surveys.
Clause 120 of the Income Tax Bill, 2025 disallows any loss, whether carried forward or otherwise, and any unabsorbed depreciation from being set off against undisclosed income included in total income where such income is detected as a consequence of a search, requisition, or survey; the clause is expressly overriding and depends on the Bill's definition of undisclosed income for its scope.

Carry forward of capital losses: long-term losses limited to long-term gains; short-term losses may be set off under new Bill.
Clause 111 and Section 74 permit carry forward and set off of unabsorbed capital losses, distinguishing long-term losses (set off only against long-term capital gains) from short-term losses (set off against any capital gains), and both limit carry forward to an eight-year period measured from the year the loss was computed; Clause 111 uses the term "tax year" and cross-references related provisions in the new Bill while Section 74 refers to "assessment year."

Carry-forward restrictions on losses after ownership or constitution changes limit tax benefits from strategic restructuring.
Clause 119 restricts carry forward and set off of losses after changes in firm constitution, business succession by non-inheritance successors, and corporate shareholding changes unless continuity of beneficial voting power is maintained. It permits an exception for start-ups where all original shareholders retain their shares and losses occurred within the first ten years, and enumerates exceptions (death, gifts to relatives, specified amalgamations/demergers, approved insolvency resolution plans) while defining terms relevant for application.

Loss carryforward restrictions: ownership or constitution changes can bar set-off unless continuity conditions and specified exceptions apply.
Clause 119 conditions the permissibility of carrying forward and setting off past losses where ownership or constitution changes occur: it denies set-off for losses attributable to retired or deceased partners upon firm reconstitution, disallows successors (other than by inheritance) from using predecessor losses, and restricts non-public companies from setting off prior losses after shareholding changes unless continuity conditions including original beneficial owner control or start-up safeguards are met; specified exceptions and ongoing compliance requirements are provided.

Ring fenced treatment of racehorse losses restricts cross setoff and permits carry forward only within the same activity.
Clause 115 creates a ring fenced regime: losses from the specified activity of owning and maintaining race horses cannot be set off against other income; unabsorbed losses may be carried forward and set off only against income from the same activity, subject to continuation of the activity and defined temporal limits and eligibility definitions.

Restriction on loss set-off: specified business losses may be offset only against profits of other specified businesses.
Losses from a specified business are restricted to set-off only against profits of other specified businesses in the same year; unabsorbed losses may be carried forward and set off exclusively against profits of specified businesses in subsequent years. The provision relies on defined terms for "specified business" and "unabsorbed loss," confines tax incentives to their intended category to prevent cross-business erosion of the tax base, and requires segregated record-keeping to ensure compliance.

Set-off of speculation losses confined to speculation profits; carry forward limited and prioritised before other allowances.
Clause 113 confines adjustment of losses from a speculation business to profits of another speculation business in the same year; permits carry forward of unabsorbed speculation losses to subsequent years for set off only against speculation business profits within a limited statutory period; requires that unabsorbed speculation losses be set off before certain carried forward allowances; and defines both speculation business (including a deeming rule for share trading to that extent) and specified exceptions to that classification.

Carry forward and set off of losses preserved for successor co operative banks, subject to specified conditions and penalties.
Successor co operative banks may set off predecessor accumulated business losses and unabsorbed depreciation in amalgamations as if the amalgamation had not occurred; in demergers directly related tax attributes transfer wholly to the resulting bank while non relatable attributes are apportioned by asset distribution. Application requires continuity of banking business, retention and use of fixed assets, and genuine continuation of operations; failure to meet conditions renders previously allowed set offs taxable in the year of non compliance. Clause 118 adds a Central Government power to prescribe further conditions to ensure genuine business purposes.

Treatment of accumulated losses and unabsorbed depreciation: successor may utilise predecessor tax attributes subject to a limited carry forward period.
Clause 117 deems accumulated loss and unabsorbed depreciation of specified predecessor entities to be those of the amalgamated entity when amalgamations involve banking companies, corresponding new banks, or government companies under Central Government sanctioned schemes, including cases following strategic disinvestment; successor entities may utilize these tax attributes in the year of amalgamation but are subject to a limited carry forward period and prescribed compliance and reporting requirements.

Treatment of accumulated losses and unabsorbed depreciation allows continuity on corporate reorganisations subject to compliance conditions.
Clause 116 permits continuity of accumulated loss and unabsorbed depreciation on amalgamation, demerger and related reorganisations by deeming the transferor's tax attributes to be those of the transferee or successor, subject to conditions such as asset retention and business continuity. It limits transfers in strategic disinvestment to amounts existing when public sector status ceased, allocates losses in demergers according to transferred undertakings or retained assets, extends treatment to successor entities including LLPs, and empowers the Central Government to prescribe conditions; non compliance attracts tax liabilities for successor entities.

Carry forward of business losses allows set off against future business income, prioritised before other carried allowances.
Clause 112 permits carry forward and set off of unabsorbed business losses-defined as losses under "Profits and gains of business or profession" excluding speculation losses-against future business or professional profits, mandates that such losses be set off before any other carried forward allowances, and limits the period during which losses may be carried forward, aligning with the existing temporal framework.

Carry forward of house property loss - allows head-specific set off against future house property income, time-limited.
Clause 110 permits unabsorbed losses under the head "Income from house property" to be carried forward and set off only against future income from the same head, subject to a statutory time limitation, and defines "unabsorbed loss from house property" as losses not set off against other income heads in the relevant year.

Set-off of losses: new limits bar using business and capital losses to reduce salary and other non-capital income.
Clause 109 permits set-off of losses under any income head except capital gains against income from other heads in the same year, subject to limits: business losses cannot be set off against salary income; house property losses are set off against other heads only up to a capped amount; and capital gains losses cannot be set off against non-capital income. The clause thus confines capital losses within their category and imposes head-specific restrictions requiring careful tax planning and record-keeping.

Set-off of losses under the same head: clarifies offset rules for capital and non-capital income, refining capital gains set-off.
Clause 108 permits set-off of a loss from any source against income from any other source under the same head (excluding capital gains), while treating capital gains losses separately: long-term capital losses may be set off only against other long-term capital gains, and short-term capital losses may be set off against gains from any capital asset, thereby requiring accurate classification of assets and records to effect permissible intra-head offsets.

Deemed income from informal credit instruments: non account payee transactions treated as taxable, prompting formalisation of payments.
Clause 106 and Section 69D deem amounts borrowed or repaid through hundis, negotiable instruments, or Board specified modes to be the income of the borrower or repayer when not transacted by account payee cheque, with provisions capturing interest where applicable and safeguards to prevent double taxation once an amount has been treated as income.

Unexplained expenditure treated as income increases tax exposure when taxpayers fail to satisfactorily explain expenditure sources.
Clause 105 deems unexplained expenditure as income when an assessee fails to provide a satisfactory explanation, confers evaluative power on the Assessing Officer to judge adequacy of explanations, and disallows any deduction for amounts so deemed; Section 69C operates similarly but uses permissive language and contains a deduction proviso, reflecting comparable objectives to prevent tax evasion while differing in textual strictness and potential administrative effect.

Unexplained asset rules now include virtual digital assets, expanding deeming powers where explanations are unsatisfactory.
Where an asset is unrecorded or its recorded amount is less than actual value and the assessee fails to provide a satisfactory explanation, Clause 104 and Section 69B treat the unexplained excess as deemed income for the year of discovery; Clause 104 expressly adds virtual digital assets, while both provisions vest the Assessing Officer with discretion to accept or reject explanations, creating valuation and verification challenges.

Unexplained investments treated as income when taxpayer fails to satisfactorily explain source, shifting burden to taxpayer and empowering assessing officer discretion.
Clause 103 deems unrecorded investments or amounts exceeding recorded investment as income if the assessee fails to provide a satisfactory explanation to the Assessing Officer; the provision places the evidential burden on the assessee and employs a deeming mechanism to include unexplained amounts in taxable income. Section 69B applies the same explanation-and-deeming approach to investments, bullion, jewellery and other valuable articles where recorded amounts are less than actual expenditure, relying on Assessing Officer evaluation to determine whether excess amounts are to be treated as income.