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Carry forward and set off of capital loss – Sec 74

U.C Date : 25 Feb 2015

If there is a loss under the head Capital Gains and it cannot be set off or only partially set off under the same head or other head of income u/s 71 then  such loss can be carried forward to subsequent years. The loss so carried forward can be set off from income under the head “Capital Gains”(not from income under other heads).

Long term capital loss can be set off only against long term capital gain.

Loss can be carried forward for a period of eight years from the year in which the loss is occurred.

Loss can be carried forward only when a return is filed by assessee under sec 139 within due date. If return is submitted after due date the delay may be condoned if a few conditions are satisfied.[ circular no. 8/2001 dated may 16 2001]

Bare Act for Sec 74

Bare Act for Sec 74

(1) Where in respect of any assessment year, the net result of the computation under the head “Capital gains” is a loss to the assessee, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and—

(a) in so far as such loss relates to a short-term capital asset, it shall be set off against income, if any, under the head “Capital gains” assessable for that assessment year in respect of any other capital asset;

(b) in so far as such loss relates to a long-term capital asset, it shall be set off against income, if any, under the head “Capital gains” assessable for that assessment year in respect of any other capital asset not being a short-term capital asset;

(c) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on.]

(2) No loss shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed.

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