What is the Meaning of ‘Set-Off & Carry Forward’ of Business Losses

Set-Off means adjustment of certain losses against the income under other sources in the same assessment year. Carrying Forward of unadjusted losses to be set-off in subsequent years is called Carry Forward.

How to adjust Business Losses ?

If there is a loss in the business, the same can be adjusted against profits made in any other business of the same tax payer. The Loss, if any, still remaining, can be adjusted against Income from any Other Source.

From A/Y 2005-2006 loss from Business cannot be set off against Salary Income.

However, Loss sustained in speculative business can be adjusted only against profits earned in another speculative business.

Business Loss can be carried forward for a maximum period of next 8 (Eight)  Assessment Years and adjusted against Business Profit of the subsequent years.

Unabsorbed Depreciation can be Set-Off even if Business/Profession is discontinued and can be carried forward for unlimited number of years.

However, for claiming the benefit of carry forward of losses, the tax payer has to invariably file his returns within due date.
 
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