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Step 2
Inter
source
adjustmen
t of losses
wherever
allowed
u/s 70
Inter
head
adjustme
nt
wherever
allowed,
where
such
losses are
not fully
set off
under
step 2
Sec. 71
Step 4
C/f of losses
wherever
allowed, where
such
losses
are partly /
fully not set off
under steps 2
and 3 Secs.
71B, 72, 74
C/f and set off
is subject to
anti avoidance
provisions
of
Sec.72A(4),
78, 79, 80,
94(7), 94(8)
Step 5
Carry
forward
and set
off
of
losses in
special
circumstances.
Secs.
72A,
72AA
72AB
&
Any
profit
from Any other
business of owning profit
and maintaining race
horses
business
House property
House property
Note :
Loss from an exempt source cannot be set off against profits from
a taxable source of income. For example, long term capital loss
on sale of shares sold through a recognised stock exchange
cannot be set off against long term capital gains on sale of land.
Can
absorb
loss of
Salaries
Any head
1.
2.
3.
4.
House property
Any head
1. Capital loss
2. Speculation business loss
3. Loss from business of owning
and maintaining race horses
4. Loss from a source which is
exempt
6
Can
absorb
loss of
Business or
profession
Any head
1. Capital loss
2. Speculation business loss
3. Loss from business of owning
and maintaining race horses
4. Loss from a source which is
exempt
Capital gains
Any head
Can
absorb
loss of
Other sources
Any head
No head
1. Capital loss
2. Speculation business loss
3. Loss from business of owning
and maintaining race horses
4. Loss from a source which is
exempt
Except income
under the head
Any head
Profit from
speculation business
Any head
Salaries
b. Non-speculation
business
Capital loss
a. Short term loss
b. Long term loss
Other sources
a. Loss from business Profit from business
of owning and
of owning and
maintaining race
maintaining race
Perio
d of
carry
forwa
rd
Continu
ity of
source
Timel
y
filing
of
Retur
n
House property
loss
(AY 99-00 onwards)
House property
income only
8
years
No
No
Speculation
4
business profits only years
No
Yes
No
No
Business /
Profession
1. Speculation
loss
2.
Nonspeculation
loss
a. Due to
)
) Any income
) except salaries
) w.e.f. AY 2005-06
No
time
10
Timel
y
filing
of
Retur
n
8 years No
Yes
8 years No
Yes
4 years Yes
Yes
11
12
Illustration 1
Mr. A submits the following particulars for AY 2013-14. Compute his gross total income.
Rs.
Income from salaries
4,00,000
Loss from self occupied property
(-)70,000
Business loss
(-)1,00,000
Bank interest received
80,000
Solution 1
Income from salaries
4,00,000
Income from house property (-) 70,000
------------3,30,000
Business income (-)1,00,000
Bank interest received
80,000
-----------Business loss to be carried forward
------------Gross total income 3,30,000
========
(-)
20,000
13
Illustration 2
Mr. B furnishes the following particulars for AY 2013-14. Compute his
gross total income.
Rs.
Income from salaries
45,000
Income from house property
(24,000)
Income from business non speculative
(22,000)
Income from business speculative
(4,000)
Short term capital gains
(25,000)
Long term capital gains
19,000
14
Solution 2
Income from salaries 45,000
Income from house property (24,000)
-----------21,000
Profits and gains of business & profession
Income from business non speculative
(22,000)
Income from business speculative (4,000)
-----------Business loss to be carried forward
(26,000)
Capital gains
Short term capital gains
(25,000)
Long term capital gains
19,000
----------Short term capital loss to be carried forward
---------Gross total income 21,000
======
(6,000)
15
Illustration 3
For AY 2013-14, Mr. C has the following income and brought forward
losses. What is the taxable capital gains for AY 2013-14?
Rs.
Short term capital gains on sale of shares
1,50,000
Long term capital loss of AY 2011-12
(96,000)
Short term capital loss of AY 2012-13
(37,000)
Long term capital gain
75,000
16
Solution 3
Rs.
Short term capital gains on sale of shares
1,50,000
Less : Short term capital loss of AY 2012-13
(37,000)
-----------1,13,000
Long term capital gain
75,000
Less : Long term capital loss of AY 2011-12
(96,000)
-----------Long term capital loss of AY 2011-12 to be carried forward (21,000)
-------------Taxable short term capital gain
1,13,000
========
17
Illustration 4
Mr. D has the following income for AY 20132-14. Compute Mr. Ds
gross total income.
Rs.
Income from the activity of owning and maintaining race horses
75,000
Income from textile business
85,000
Brought forward textile business loss
(50,000)
Brought forward loss from the activity of owning and
maintaining race horses (pertaining to AY 2010-11)
(96,000)
18
Solution 4
Rs.
Income from the activity of owning and maintaining race horses
Less : Brought forward loss from the activity of owning and
maintaining race horses (96,000)
-----------Loss from the activity of owning and maintaining race horses
to be carried forward (21,000)
Income from textile business
85,000
Less : Brought forward textile business loss
-----------35,000
--------Gross total income 35,000
======
75,000
(50,000)
19
Illustration 5
Mr. E has furnished the following details for AY 2013-14. Compute his
gross total income.
Rs.
Income from salaries
1,50,000
Income from speculation business
60,000
Income from non-speculation business
(40,000)
Short term capital gain
80,000
Long term capital loss of AY 2011-12
(30,000)
Winning from lotteries
20,000
20
Solution 5
Rs.
Income from salaries
1,50,000
Profits and gains of business or profession
Income from speculation business
60,000
Less : Income from non-speculation business
(40,000)
---------20,000
Capital gains
Short term capital gain
80,000
Long term capital loss to be carried forward
(30,000)
Income from other sources
Winning from lotteries
20,000
------------Gross total income 2,70,000
========
21
Illustration 6
Compute the gross total income of Mr. F for AY 2013-14 from the
information given below :
Rs.
Income from house property
1,25,000
Income from business (before providing for depreciation) 1,35,000
Short term capital gain on sale of shares
56,000
Long term capital loss from sale of property
(brought forward from AY 2012-13)
(90,000)
Current year depreciation
26,000
Brought forward business loss
(loss incurred six years ago)
(45,000)
22
Solution 6
Rs. Rs.
Income from house property
1,25,000
Profits and gains of business or profession
Income from business (before depreciation)
1,35,000
Less : Current year depreciation
(26,000)
------------1,09,000
Less : Brought forward business loss
(45,000)
------------64,000
Capital gains
Short term capital gain on sale of shares
56,000
Brought forward long term capital loss from
sale of property to be carried forward (90,000)
-----------Gross total income
2,45,000
=======
23