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Unabsorbed Depreciation

U.C Date : 25 Feb 2015

If there is a loss under business and profession and the reason for such loss is depreciation, then it is called unabsorbed deprecation and it shall be allowed to be carried forward.

Additional Points

  1. The depreciation shall be carried forward even the business/profession to which is relate even of the business/profession not in existence.
  2. Return of loss is not required to be submitted for carry forward of unabsorbed depreciation
  3. The assess should set off brought forward losses in the following manner: –
    • First of all current year depreciation will be adjusted.
    • Then brought forward business losses will be set off (speculative or non-speculative)
    • Then unabsorbed depreciation will be set-off against business income.
  4. Unabsorbed depreciation can be carried forward for indefinite number of years.
  5. Unabsorbed depreciation can be set off from any head of income other than Salary and Capital Gain in any year.

Examples for calculation of unabsorbed depreciation

  • Example 1

Profit from business before depreciation                   4,00,000

Depreciation                                                                     6,00,000

Unabsorbed depreciation                                               2,00,000

  • Example 2

Profit from business before depreciation                    4,00,000

Depreciation                                                                      6,00,000

Income from house property                                          1,00,000

Unabsorbed depreciation                                                1,00,000

  • Example 3

Loss from business before depreciation                       4,00,000

Depreciation                                                                       6,00,000

Income from house property                                          1,00,000

Unabsorbed depreciation                                                6,00,000

Carried forward business loss                                        3,00,000

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