Just a moment...

⚠ ✕
❮ Top
☎ Help
☰
×

By creating an account you can:

Logo TaxTMI
Keyword Search :
AI Tools : New
Ask tax questions in natural language. Powered by AI trained on the TaxTMI legal database. Use AI Tools ➞
Call Us / Help / Feedback✕

Contact Us At :

✉ E-mail: [email protected]

✆ Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters 0/2000
Make Most of Text Search ✕
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
    6. Text Search
  6. The system will try to fetch results that contains ALL your words.
  7. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
    8. Text Search
╳
Add to...
You have not created any category. Kindly create one to bookmark this item!
✕
Create New Category
Hide
Title :
Description :
❮❮ Hide
❮ Default View
Expand ❯❯
Close ✕
🔎 TMI Notes - Adv. Search ❯
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text ❯
  • Main Text
  • Main Text + AI Text
  • AI Text
Law:
---- All Laws---- ❯
  • ---- All Laws----
  • Benami Property
  • Bill
  • Central Excise
  • Companies Law
  • Customs
  • DGFT
  • FEMA
  • GST
  • GST - States
  • IBC
  • Income Tax
  • Indian Laws
  • Money Laundering
  • SEBI
  • SEZ
  • Service Tax
  • VAT / Sales Tax
Types:
---- All Types ---- ❯
  • ---- All Types ----
  • Act Rules
  • Case Laws
  • Circulars
  • Manuals
  • News
  • Notifications
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
Relevance Default Date
    Manuals Income Tax
    What is the impact of ICDS X containing transitional provisions.
    Manuals Income Tax
    Under ICDS X, whether reversal of an asset and the related income would mean that the entry which wa...
    Manuals Income Tax
    Can any expenditure should set off against a provision recognised for another expendiure.
    Manuals Income Tax
    Expenditure on post-retirement benefits like provident fund, gratuity, etc. are covered by specific ...
    Manuals Income Tax
    What is the manner of recording the borrowing costs.
    Manuals Income Tax
    What are the activities necessary to prepare inventory for its intended sale as per ICDS IX.
    Manuals Income Tax
    There are specific provisions in the Act read with Rules under which a portion of borrowing cos...
    Manuals Income Tax
    How to allocate borrowing costs relating to general borrowing as computed in accordance with formula...
    Manuals Income Tax
    Under ICDS IX does borrowing cost include exchange differences arising from foreign currency borrowi...
    Manuals Income Tax
    Whether bill discounting charges and other similar charges would fall under the definition of borrow...
    Manuals Income Tax
    Which are the borrowing costs covered by ICDS IX.
    Manuals Income Tax
    What is the manner in which securities held as stock-in-trade are required to be valued.
    Manuals Income Tax
    Para 9 of ICDS-VIII on securities requires securities held as stock-in-trade shall be valued at actu...
    Manuals Income Tax
    Which ICDS would govern derivative instruments.
    Manuals Income Tax
    For subsidy received prior to 1st day of April 2016 but not recognised in the books pending satisfac...
    Manuals Income Tax
    How to deal with a situation where compensation is payable for the purposes of giving ‘immediate f...
    Manuals Income Tax
    Whether a grant which is not directly relatable to non-depreciable assets should be concluded as an ...
    Manuals Income Tax
    Where the grants are received for assets which are outside the block of assets, then what is the tre...
    Manuals Income Tax
    Whether grants should be recognised even in cases where there is no certainty that the conditions at...
    Manuals Income Tax
    How are Government grants to be recognized.
❮
❯
❯❯
Maximize Maximize Maximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

+

Are you sure you want to delete "My most important" ?

NOTE:

Open Link
Notes
Showing Results for :
Reset Filters
Results Found:
Show All Summaries Hide All Summaries
Manuals Income Tax
What is the impact of ICDS X containing transitional provisions.
Show AI Summary
Transitional provisions for ICDS X ensure recognition of provisions and contingent items to prevent double taxation or omission.
Transitional recognition under ICDS X requires that provisions, contingent liabilities and contingent assets and related income be recognised for previous years commencing on or after 1 April 2016 in accordance with this standard, after taking into account any amount recognised for the same items for previous years ending on or before 31 March 2016; the rule aims to prevent double taxation or omission of income.
Manuals Income Tax
Under ICDS X, whether reversal of an asset and the related income would mean that the entry which wa...
Show AI Summary
Supremacy of tax law: reversal of an ICDS-recognised asset must follow tax deduction rules, permitting write-off as bad debt.
Reversal of an asset and related income recognised under ICDS X must conform to the Income-tax Act where conflicts arise; the Act's tax-deduction treatment applies, allowing write-off as a bad debt rather than simply reversing the original accounting recognition entry.
Manuals Income Tax
Can any expenditure should set off against a provision recognised for another expendiure.
Show AI Summary
Set-off of provisions: expenditures may be set off only against the original provision, not provisions for different purposes.
Under ICDS X, expenditures must be set off only against the original provision for which they were recognised; expenditures cannot be offset against provisions recognised for a different event or purpose, as that would conceal the separate financial effects of distinct events and undermine transparent disclosure of provisions, contingent liabilities and contingent assets.
Manuals Income Tax
Expenditure on post-retirement benefits like provident fund, gratuity, etc. are covered by specific ...
Show AI Summary
Employee post retirement benefit provisioning excluded from ICDS X, governed by specific statutory provisions for income computation.
Provisioning for employee post retirement benefits covered by AS 15 shall continue to be governed by specific provisions of the Act and are not dealt with by ICDS X; ICDS X does not apply to liabilities otherwise falling within AS 15.
Manuals Income Tax
What is the manner of recording the borrowing costs.
Show AI Summary
Borrowing costs capitalization requires capitalizing interest for qualifying assets; inventory only when production is prolonged.
Borrowing costs directly attributable to acquisition, construction or production of tangible and intangible assets must be capitalized as part of the asset cost. Inventory borrowing costs are capitalized only when the inventory requires an extended period to become saleable. Specific borrowings for a qualifying asset require capitalization of actual borrowing costs incurred during the qualifying period. For general borrowings, a formulaic allocation apportions borrowing costs to qualifying assets based on the ratio of qualifying assets to total assets.
Manuals Income Tax
What are the activities necessary to prepare inventory for its intended sale as per ICDS IX.
Show AI Summary
Inventory preparation processes define activities included in inventory cost when making goods fit and saleable under accounting standards.
Activities necessary to prepare inventory for its intended sale include all processes required to make inventory functional for its intended use and to render it saleable, notably quality control to verify fitness for use and primary packing where goods are normally sold in packed condition.
Manuals Income Tax
There are specific provisions in the Act read with Rules under which a portion of borrowing cos...
Show AI Summary
Borrowing cost capitalization must exclude portions disallowed by specific statutory provisions, only allowable amounts may be capitalised.
Borrowing costs capitalised under ICDS IX must exclude amounts disallowed by specific provisions of the Act; only the portion of borrowing cost that remains allowable under the Act may be capitalised, because specific statutory disallowances override ICDS treatment.
Manuals Income Tax
How to allocate borrowing costs relating to general borrowing as computed in accordance with formula...
Show AI Summary
Capitalization of borrowing costs: general borrowing must be allocated to qualifying assets and capitalized on an asset-by-asset basis.
General borrowing costs computed under the ICDS-IX formula must be apportioned among qualifying assets and capitalized on an asset-by-asset basis, so that each qualifying asset's capitalized borrowing cost reflects its proportionate share of general borrowing under the standard.
Manuals Income Tax
Under ICDS IX does borrowing cost include exchange differences arising from foreign currency borrowi...
Show AI Summary
Exchange differences excluded from borrowing costs under ICDS IX; foreign exchange effects governed by ICDS VI.
Exchange differences from foreign currency borrowings that are treated as adjustments to interest are excluded from borrowing costs under ICDS IX; the effects of changes in foreign exchange rates, including those relating to interest, are governed by ICDS VI.
Manuals Income Tax
Whether bill discounting charges and other similar charges would fall under the definition of borrow...
Show AI Summary
Borrowing cost: bill discounting and similar charges treated as borrowing cost, except when not tied to borrowed funds.
The definition of borrowing cost is inclusive and generally covers bill discounting charges and similar charges as borrowing cost for income computation and disclosure; however, discounting charges that do not arise from borrowing funds are excluded from that definition.
Manuals Income Tax
Which are the borrowing costs covered by ICDS IX.
Show AI Summary
Borrowing costs include interest and related charges such as commitment charges, amortised discount and finance lease charges.
Borrowing costs under ICDS IX comprise interest and other costs incurred in connection with borrowing funds, including commitment charges, amortised discount or premium, amortised ancillary costs in arranging borrowings, and finance charges for assets taken on finance lease.
Manuals Income Tax
What is the manner in which securities held as stock-in-trade are required to be valued.
Show AI Summary
Valuation of securities as stock-in-trade: mandatorily at lower of actual cost and net realizable value.
Securities held as stock-in-trade must be valued at the lower of actual cost initially recognized and net realizable value at year-end. Unlisted or unquoted securities held as stock-in-trade are to be measured at actual cost as initially recognized, under the income computation and disclosure standards framework.
Manuals Income Tax
Para 9 of ICDS-VIII on securities requires securities held as stock-in-trade shall be valued at actu...
Show AI Summary
Valuation of securities: aggregate category wise cost compared with net realisable value, lower amount taken as carrying value.
For subsequent measurement under ICDS VIII, securities held as stock in trade are aggregated category wise; for each category the aggregate cost and aggregate net realisable value are compared, and the lower of the two is taken as the carrying value.
Manuals Income Tax
Which ICDS would govern derivative instruments.
Show AI Summary
Derivatives accounting: ICDS VI governs typical derivatives, ICDS I applies residually, capital-asset derivatives are excluded.
ICDS VI supplies guidance for derivative contracts such as forward contracts; derivatives outside ICDS VI's scope fall under ICDS I. Derivative instruments that qualify as capital assets are excluded from ICDS and thus not governed by those standards.
Manuals Income Tax
For subsidy received prior to 1st day of April 2016 but not recognised in the books pending satisfac...
Show AI Summary
Recognition of government grants: pre-existing grants deemed recognised on receipt while later grants follow ICDS recognition criteria.
Grants actually received before the ICDS effective date are deemed recognised on receipt under Para 4(2) of ICDS VII and remain governed by pre-ICDS law; grants received on or after the effective date must be recognised only when the ICDS VII recognition criteria in Paras 5-9 are satisfied, with recognition then following ICDS VII.
Manuals Income Tax
How to deal with a situation where compensation is payable for the purposes of giving ‘immediate f...
Show AI Summary
Government grant for immediate financial support must be recognised when receivable, irrespective of actual receipt.
Government grants given as immediate financial support and not tied to specific expenditure must be recognised when the grantee is entitled and sums become receivable; actual receipt is immaterial. If the grant is confined to an individual enterprise and grant-related conditions are met, recognition occurs in the period of receivability, governing timing of income inclusion and disclosure under the income computation framework.
Manuals Income Tax
Whether a grant which is not directly relatable to non-depreciable assets should be concluded as an ...
Show AI Summary
Government grants treatment: grants not directly relatable to nondepreciable assets treated as taxable income rather than reduction in asset cost.
Grants not directly relatable to nondepreciable assets are to be recognised as taxable income under the Act rather than deducted from asset cost; the ICDS preamble confirms the Act prevails over ICDS, and paragraph 7 of ICDS VII applies solely to depreciable assets where reduction of asset cost is appropriate.
Manuals Income Tax
Where the grants are received for assets which are outside the block of assets, then what is the tre...
Show AI Summary
Recognition of government grants: generally recognized as income on receipt unless reasonable certainty permits spreading with related costs.
Grants for assets outside the block of depreciable assets are to be recognized as income; statutory tax provisions control and preclude spreading recognition beyond the year of receipt, except where there is reasonable certainty of receipt permitting deferral and matching with costs incurred for obligations related to the non-depreciable assets.
Manuals Income Tax
Whether grants should be recognised even in cases where there is no certainty that the conditions at...
Show AI Summary
Recognition of government grants: must occur on receipt; potential reversals are applied against unamortized deferred credit balances.
ICDS VII requires government grants to be recognised on the date of receipt and prohibits deferral beyond receipt; where grants become refundable because attached conditions are unmet, reversal of initial recognition must first be applied to the unamortized deferred credit arising from the grant, so income recognition must reflect both receipt and the certainty of meeting conditions.
Manuals Income Tax
How are Government grants to be recognized.
Show AI Summary
Recognition of government grants requires reasonable certainty of compliance and receipt; disclose in income computation accordingly.
Under ICDS VII, government grants are to be recognized when there is reasonable certainty that the related conditions will be complied with and that the grants will be received; such grants should not be postponed beyond the actual receipt date for income computation and disclosure purposes.

TMI Notes

Back

All TMI Notes

Showing Results for :
Reset Filters
No Records Found

TMI Notes

Home › TMI Notes › Income Tax › Act-Rules › Category › This
Back

All TMI Notes

whatsapp Join Channel
Showing Results for : Reset Filters
Income Tax

Comparison of Section 112 "Carry forward and set off of business loss." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

1 September, 2025

Contents
Acts
Rules & Regulations
Summary
Note

Note

-

Bookmark

Print

Print

Print Options

Section 112 Carry forward and set off of business loss.

Income-tax Act, 2025

At a Glance

Clause 112 of the Income Tax Bill, 2025 (Old Version) sets out the rule for carry forward and set off of "unabsorbed business loss" (excluding speculation business losses): such losses are carried forward to subsequent years and may be set off only against profits and gains from business or profession; carry forward is limited to eight succeeding tax years; and unabsorbed business loss takes precedence over carried forward allowances u/ss 33(11) and 45(7). Affects taxpayers carrying business losses and the Revenue. Effective date/decision date: Not stated in the document.

Background & Scope

Statutory hooks: Clause 112 of the Income Tax Bill, 2025 (Old Version) purports to govern "Carry forward and set off of business loss" and interacts with section 109 (set off between heads) and with sections 33(11) and 45(7) (carried forward allowances). The clause covers loss computed under the head "Profits and gains of business or profession" excluding loss from speculation business. The Bill explicitly defines "unabsorbed business loss" in sub-section (4) as the portion not, or not wholly, set off u/s 109. No further definitions, thresholds or procedural rules are provided in the clause text.

Statutory Provision Mode

Text & Scope

Clause 112 comprises four sub-sections:

  • Sub-section (1) mandates that unabsorbed business loss (other than speculation loss) for a tax year shall be carried forward to the subsequent tax year and can be set off only against profits and gains of business or profession carried on and assessable for that subsequent year; the process continues iteratively.
  • Sub-section (2) limits carry forward to not more than eight tax years immediately succeeding the tax year in which the loss was first computed.
  • Sub-section (3) prescribes priority: the unabsorbed business loss must be set off before any carried forward allowance u/s 33(11) or 45(7) is allowed to be set off.
  • Sub-section (4) defines "unabsorbed business loss" as loss under "Profits and gains of business or profession" (excluding speculation business) not wholly set off against income from any other head u/s 109 for that year.

Interpretation

The clause conveys a legislative intent to confine set off of certain business losses strictly to business/profession income in future years and to create a temporal cap on carry forward (eight years). The express definition in sub-section (4) signals intent to limit the operation to losses not already absorbed under inter-head set off rules (section 109). The priority rule indicates a policy choice to prefer write-down of business loss over utilisation of specified carried-forward allowances.

Exceptions/Provisos

Carve-outs in the text: exclusion of losses sustained in a speculation business. No other provisos, thresholds, or exceptions are set out. Not stated in the document: any special treatment for amalgamations, demergers, change of ownership, or continuity of business conditions. Not stated in the document: any distinction between domestic and non-resident taxpayers, or treatment where a business ceases.

Illustrations

  • Example 1: Taxpayer A has a business loss of Rs. 10 lakh in Year 1 (non-speculation). In Year 2, A earns business profits of Rs. 6 lakh. Under sub-section (1), A can set off Rs. 6 lakh of the carried forward loss against Year 2 business profit; the remaining Rs. 4 lakh is carried to subsequent year(s), subject to the eight-year limit.
  • Example 2: Taxpayer B has a loss of Rs. 5 lakh in Year 1. In Year 2, B has salary income of Rs. 3 lakh but no business profit. Under the clause, the carried forward loss cannot be set off against salary; it may be carried forward to later years until business/profession profit arises or the eight-year limit expires.
  • Example 3: Taxpayer C has carried forward allowance u/s 33(11) for Year 2. If C also has unabsorbed business loss, sub-section (3) requires the business loss be set off first before utilising the carried forward allowance.

Interplay

The clause expressly interacts with section 109 (inter-head set off) by defining the unabsorbed loss as that not set off u/s 109. It also establishes priority vis-`a-vis carried forward allowances u/ss 33(11) and 45(7). Not stated in the document: any cross-reference to loss provisions for capital gains, specific rules for amalgamation, or to other carry-forward rules for different categories of loss (e.g., capital loss).

Differences between Document 1 Section 112 of the Income-tax Act, 2025 and Document 2 Clause 112 of the Income Tax Bill, 2025 (Old Version)

  • Definition of the loss term: The Bill (old version) expressly defines and uses the term "unabsorbed business loss" in sub-section (4) and explains that it is loss under "Profits and gains of business or profession" (other than speculation business) not wholly set off u/s 109. The enacted Section 112 does not include this definitional sub-section; it uses the phrase "loss computed under the head 'Profits and gains of business or profession'" without labelling it "unabsorbed business loss."
    • Practical impact: The Bill's explicit definition provides clearer labelling and may reduce ambiguity on scope; the enacted text remains substantively similar but omits the explicit definitional label that could assist interpretation and drafting of rules or guidance.
  • Order and scope of set off language: The Bill states that the unabsorbed business loss "shall be carried forward to the subsequent tax year and shall be set off only against the profits and gains of business or profession, carried on by him and assessable for that tax year, if any, computed for such subsequent tax year, and so on." The enacted Section 112 sets out at sub-section (1) that the loss shall be carried forward and "(i) be set off against the profits and gains, if any, of any business or profession carried on by him for that tax year; and (ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following tax year and so on."
    • Practical impact: The substantive requirement - carry forward and set off only against profits and gains from business or profession - appears consistent in both texts. The enacted version splits the rule into two clauses (i) and (ii) describing immediate set off and further carry forward, while the Bill couples carry forward and exclusive set off more compactly. No substantive restriction beyond the Bill's language appears introduced, but the enacted text's structure may aid clarity on the iterative carry-forward process.
  • Priority rule relative to carried forward allowances: The Bill's sub-section (3) provides that the "unabsorbed business loss referred to in sub-section (1), shall first be allowed to be set off before allowing set off of any carried forward allowance u/s 33(11) or 45(7)." The enacted Section 112(3) provides the same priority in the wording: "Where any allowance of part thereof u/s 33(11) or 45(7) is to be carried forward, effect shall first be given to the provision of this section."
    • Practical impact: Both texts give set-off priority to unabsorbed business loss over specified carried-forward allowances; wording differs slightly but the allocation of priority appears unchanged in effect.
  • Temporal limit on carry forward: Both versions limit carry forward to "not more than eight tax years immediately succeeding the tax year" in which the loss was first computed (Bill) / "for more than eight tax years immediately succeeding" (enacted). Wording is substantively equivalent.
    • Practical impact: No practical change.
  • Minor drafting and terminology differences: The Bill uses "subsequent tax year" and "assessable for that tax year," whereas the enacted section uses "following tax year" and "carried on by him for that tax year." The enacted version explicitly excludes "loss sustained in a speculation business" parenthetically like the Bill's "other than loss from speculation business."
    • Practical impact: Differences are drafting level and do not introduce clear substantive divergence; the enacted text's slight rephrasing may affect interpretive emphasis but not materially alter scope.

Practical Implications

  • Compliance and risk areas: Taxpayers must track the quantum of unabsorbed business loss year-by-year and ensure set-off occurs only against business/profession profits in subsequent years; incorrect set-off against other heads risks reassessment. The eight-year cap mandates calendar of expiry for each loss, increasing record-keeping needs.
  • Record-keeping/evidence points: Maintain year-wise computation of business loss, evidence of non-speculation character, records demonstrating that no set-off u/s 109 occurred in the year of loss (so that the loss qualifies as "unabsorbed"), and records documenting priority application vis-`a-vis carried-forward allowances u/ss 33(11)/45(7). Not stated in the document: specific forms or filings required to claim carry forward.

Key Takeaways

  • Unabsorbed business loss (excluding speculation loss) can only be set off against business/profession profits in subsequent years.
  • Carry forward is limited to a maximum of eight tax years immediately succeeding the year of computation.
  • Unabsorbed business loss takes precedence over carried forward allowances u/ss 33(11) and 45(7).
  • The Bill explicitly defines "unabsorbed business loss," clarifying that it means loss not set off u/s 109.
  • No procedural, transitional or special-case provisions are included; matters such as cessation of business, change in ownership, or cross-reference to other loss provisions are not addressed in the clause.

Full Text:

Section 112 Carry forward and set off of business loss.

Topics

Acts Income Tax
Next ➔