1. Inter-source set off of losses (within head). Loss from one source of income can be, set off from income of another source within the same head of income except
(a) Speculation loss : It can be set off only from speculation gain and not from any other income. But loss from any other source/head can be set off from speculation gain, if any.
(b) Expenses on maintenance of horses for race purposes can be set off only from income of such activity or race winnings from horses. It cannot be set off from• any other income.
(c) Loss under the head capital gains- explained in 3 below
2. Inter-head set off (Outside head). A loss which could not be set off within the same head of income shall be allowed to be set off out of income of any other head in the same assessment year but subject to certain exceptions.
(a) Speculation Loss—as explained above.
(b) Expenses on maintenance of horses for race purposes—as abov.
(c) Loss under the head capital gains—explained in 3 below.
3. Loss under the head Capital Gains
(a) Short term capital loss can be set off from either short term or from long term capital gain.
(b) Long term capital loss can be set off only from long term capital gains and not from any other income.
(c) Loss from any other head can be set off from income from capital gains, if any.