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Set off of loss from another head of income – Sec 71

U.C Date : 25 Feb 2015

After setting off of losses under the same head, if loss remains unabsorbed then the remaining loss can be sett off from income from other heads.The following are exemptions to the aforesaid rule-

  • Loss In a speculation business cannot be set off from any other income.
  • Capital loss cannot be set off from any income under other head.
  • Any loss from any specified business u/s 35AD cannot be set off against other head of income.
  • Loss from activity of owning and maintaining horse racecannot be set off against other head of income.
  • Loss from business/profession cannot be set off against income under the head “salaries”
  • Loss cannot be set off against winning from lotteries, crossword puzzles etc. [Sec 58(4)] – a loss cannot be set off against winnings from lotteries, crossword puzzles, races including horse races, card games or games of any other sort or gambling or betting of any form or nature.
  • Where income from a particular source is exempt from tax, loss from such a source cannot be set off against income chargeable to tax.

Bare Act for Sec 71

Bare Act for Sec 71

 (1) Where in respect of any assessment year the net result of the computation under any head of income, other than “Capital gains”, is a loss and the assessee has no income under the head “Capital gains”, he shall, subject to the provisions of this Chapter, be entitled tohave the amount of such loss set off against his income, if any, assessable for that assessment year under any other head.

(2) Where in respect of any assessment year, the net result of the computation under any head of income, other than “Capital gains”, is a loss and the assessee has income assessable under the head “Capital gains”, such loss may, subject to the provisions of this Chapter, be set off against his income, if any, assessable for that assessment year under any head of income including the head “Capital gains” (whether relating to short-term capital assets or any other capital assets).

[(2A) Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect of any assessment year, the net result of the computation under the head “Profits and gains of business or profession” is a loss and the assessee has income assessable under the head “Salaries”, the assessee shall not be entitled to have such loss set off against such income.]

(3) Where in respect of any assessment year, the net result of the computation under the head “Capital gains” is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to have such loss set off against income under the other head.] [(4) Where the net result of the computation under the head “Income from house property” is a loss, in respect of the assessment years commencing on the 1st day of April, 1995 and the 1st day of April, 1996, such loss shall be first set off under sub-sections (1) and (2) and thereafter the loss referred to in section 71A shall be set off in the relevant assessment year in accordance with the provisions of that section.]

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