SET OFF AND CARRY FORWARD OF LOSSES

Set off of Losses

Intra (same) Head - Section 70 Inter Head - Section 71 Carry Forward

Restriction Restriction

No
DEDUCTION Loss from Speculative Business Loss under Capital Gain
is allowed U/S 73(1)
from these
Loss from 35 AD Business U/S
Loss from PGBP against Salary
73A(1)

Long Term Capital Loss U/S Loss from HP can be set off against
70(3) other head only upto Rs.2,00,000

Loss from Activity of Owning

and Maintaining Race Horses
U/S 74A(3)
Gambling incl crossword
puzzle, Loss from unexplained
In case any investment
expense in
“Other Source” Section 10 Exemption - Loss
Deduct from any
source except
As per CMA Book
here
Horse Race is different & business of owning and maintaining race horse is different

Santhosh Thirunavukkarasu
 No
Returns must be properly filed “other source”

income can be
Carry forward Losses carried forward

House Property Other Source U/S

Salary Profits and Gains of Business of Profession Capital Gain U/S 74
U/S 71B 74A(3)

No Loss Unabsorbed Other STCG LTCG c/f & set

c/f & set 35 AD
Speculation Depreciation Business off only
off against Business
U/S 73 RETURN Loss under the
only HP U/S 73A FILING NOT U/S 72 c/f & set c/f & set respective
MANDATORY off under off under income -
c/f & set both STCG LTCG only Horse Race
8 Years c/f & set c/f & set off under and LTCG
off under off under c/f & set off
specualtion any
Max Rs. 35 AD only under any business
2 Lakh only head except
salary, cross 8 years 8 years 4 years
word puzzle 8 years
4 years Indefinite
Period

Indefinite
Period

If carried forward set off from same nature of income. EXCEPT unabsorbed depreciation

Santhosh Thirunavukkarasu
Other points:
In case of
1. Change in constitution of the firm, on account of death of the partner (or) retirement of
partner, share of loss of outgoing partner has to be excluded for the purpose of c/f. This
restriction is NA to unabsorbed depreciation.
2. Amalgamation ----- unabsorbed loss ----- fresh 8 years + 1 year (year of amalgamation)
3. Demerger ----- apportioned loss for remaining years.
4. Loss of Predecessor Business ----- can be taken by successor (only by succession)
5. Closely held company ----- shareholders of at least 51% of shares at the time of loss
should continue as shareholders during set off.
a. NA for unabsorbed depreciation
b. NA for transmission of shares

Order of Set off of Losses

As per Section 72(2), brought forward business loss is to be set off before setting off unabsorbed
depreciation.
1. Current Year Depreciation
2. Brought Forward Loss from Business / Profession
3. Unabsorbed Depreciation
4. Unabsorbed Capital expenditure on Scientific Research
5. Unabsorbed Expenditure on Family Planning

Santhosh Thirunavukkarasu
CA Sums:
1. Mr. A (aged 35 years) submits the following particulars pertaining to the A.Y.2022-23:
Particulars ₹
Income from salary (computed) 4,00,000
Loss from self-occupied property (-)70,000
Loss from let-out property (-) 1,50,000
Business loss (-)1,00,000
Bank interest (FD) received 80,000
Compute the total income of Mr. A for the A.Y.2022-23, assuming that he does not opt for
the provisions of section 115BAC.

Computation of total income of Mr. A for the A.Y. 2022-23

2. Mr. B, a resident individual, furnishes the following particulars for the P.Y.2021-22:
Particulars ₹
Income from salary (computed) 45,000
Income from house property -24,000
Income from non-speculative business -22,000
Income from speculative business -4,000
Short-term capital losses -25,000
Long-term capital gains taxable u/s 112 19,000
What is the total income chargeable to tax for the A.Y.2022-23, assuming that he does not
opt for the provisions of section 115BAC?

Computation of total income of Mr. B for the A.Y. 2022-23

Santhosh Thirunavukkarasu
3. During the P.Y. 2021-22, Mr. C has the following income and the brought forwardlosses:
Particulars ₹
Short term capital gains on sale of shares 1,50,000
Long term capital loss of A.Y.2020-21 -96,000
Short term capital loss of A.Y.2021-22 -37,000
Long term capital gain u/s 112 75,000
What is the capital gain taxable in the hands of Mr. C for the A.Y.2022-23?

Computation of total income of Mr. C for the A.Y. 2022-23

Santhosh Thirunavukkarasu
4. Mr. D has the following income for the P.Y.2021-22:
Particulars ₹
Income from the activity of owning & maintaining
75,000
the race horses
Income from textile business 85,000
B/f textile business loss (relating to A.Y. 21-22) 50,000
B/f loss from the activity of owning & maintaining
96,000
the race horses (relating to A.Y. 19-20)
What is the total income in the hands of Mr. D for the A.Y. 2022-23?

Computation of total income of Mr. D for the A.Y. 2022-23

5. Mr. E has furnished his details for the A.Y.2022-23 as under:

Particulars ₹
Income from salaries (computed) 1,50,000
Income from speculation business 60,000
Loss from non-speculation business -40,000
Short term capital gain 80,000
Long term capital loss of A.Y.2020-21 -30,000
Winning from lotteries (Gross) 20,000
What is the taxable income of Mr. E for the A.Y.2022-23?

Computation of total income of Mr. E for the A.Y. 2022-23

Santhosh Thirunavukkarasu
6. Compute the gross total income of Mr. F for the A.Y. 22-23 from the information given below
Income from house property (computed) 1,25,000
Income from business (before providing for depreciation) 1,35,000
Short term capital gains on sale of unlisted shares 56,000
LTCL from sale of property (brought forward from A.Y. 21-22) (-)90,000
Income from tea business 1,20,000
Dividends from Indian companies carrying on agricultural operations 80,000
Current year depreciation 26,000
Brought forward business loss (loss incurred six years ago) (-)45,000

7. Mr. Soohan submits the following details of his income for the assessment year 22-23:
Income from salary 3,00,000
Loss from let out house property (-) 40,000
Income from sugar business 50,000
Loss from iron ore business b/f (discontinued in P.Y. 2016-17) (-) 1,20,000
Short term capital loss (-) 60,000
Long term capital gain 40,000
Dividend 5,000
Income received from lottery winning (Gross) 50,000
Winnings from card games (Gross) 6,000
Agricultural income 20,000
Short-term capital loss under section 111A (-) 10,000
Bank interest on Fixed deposit 5,000
Calculate gross total income and losses to be carried forward.

Santhosh Thirunavukkarasu
Santhosh Thirunavukkarasu
8. Mr. Batra furnishes the following details for year ended 31.03.2022:
Short term capital gain 1,40,000
Loss from speculative business 60,000
Long term capital gain on sale of land 30,000
Long term capital loss on sale of unlisted shares 1,00,000
Income from business of textile (after allowing current year depreciation) 50,000
Income from activity of owning and maintaining race horses 15,000
Income from salary (computed) 1,00,000
Loss from house property 40,000
Following are the brought forward losses:
(i) Losses from activity of owning and maintaining race horses-pertaining to A.Y. 19-20
Rs. 25,000.
(ii) Brought forward loss from business of textile Rs. 60,000 - Loss pertains to A.Y. 14-15.
Compute gross total income of Mr. Batra for the Assessment Year 2022-23. Also determine the
losses eligible for carry forward to the Assessment Year 2023-24.

Santhosh Thirunavukkarasu
9. Mr. A furnishes you the following information for the year ended 31.03.2022:
(i) Income from plying of vehicles (computed as per books) 3,20,000
(He owned 5 light goods vehicle throughout the year)
(ii) Income from retail trade of garments 7,50,000
(Computed as per books) (Sales turnover Rs. 1,35,70,000) Mr. A had
declared income on presumptive basis under section 44AD for the first
time in A.Y. 21-22.
(iii) He has brought forward depreciation relating to A.Y. 2020-21 1,00,000
Compute taxable income of Mr. A and his tax liability for the assessment year 2022- 23 with
reasons for your computation.

Santhosh Thirunavukkarasu
10. Mr. Aditya furnishes the following details for the year ended 31-03-2022:
Loss from speculative business A 25,000
Income from speculative business B 5,000
Loss from specified business covered under section 35AD 20,000
Income from salary (computed) 3,00,000
Loss from house property 2,50,000
Income from trading business 45,000
Long-term capital gain from sale of urban land 2,00,000
Long-term capital loss on sale of shares (STT not paid) 75,000
Long-term capital loss on sale of listed shares in recognized stock 1,02,000
exchange (STT paid at the time of acquisition and sale of shares)
Following are the brought forward losses:
(1) Losses from owning and maintaining of race horses pertaining to A.Y. 20-21 Rs. 2,000.
(2) Brought forward loss from trading business Rs. 5,000 relating to A.Y. 2017-18.
Compute the total income of Mr. Aditya and show the items eligible for carry forward.

Santhosh Thirunavukkarasu
11. Mr. Garg, a resident individual, furnishes the following particulars of his income and other
details for the previous year 2021-22.
i. Income from Salary (computed) 15,000
ii. Income from business 66,000
iii. Long term capital gain on sale of land 10,800
iv. Loss on maintenance of race horses 15,000
v. Loss from gambling 9,100
The other details of unabsorbed depreciation and brought forward losses pertaining to
Assessment Year 2021-22 are as follows:
(1) Unabsorbed depreciation 11,000
(2) Loss from Speculative business 22,000
(3) Short term capital loss 9,800
Compute the Gross total income of Mr. Garg for the Assessment Year 2022-23 and the amount of
loss, if any that can be carried forward or not.

Santhosh Thirunavukkarasu
12. The following are the details relating to Mr. Srivatsan, a resident Indian, aged 57, relating to
the year ended 31.3.2022:
Income from salaries (computed) 2,20,000
Loss from house property 1,90,000
Loss from cloth business 2,40,000
Income from speculation business 30,000
Loss from specified business covered by section 35AD 20,000
Long-term capital gains from sale of urban land 2,50,000
Loss from card games 32,000
Income from betting (Gross) 45,000
Life Insurance Premium paid (10% of the capital sum assured) 45,000
Compute the total income and show the items eligible for carry forward.

Santhosh Thirunavukkarasu
13. Mr. Rajat submits the following information for the financial year ending 31st March, 2022.
He desires that you should:
(a) Compute the total income and
(b) Ascertain the amount of losses that can be carried forward.
(i) He has two houses:
(a) House No. I – Income after all statutory deductions 72,000
(b) House No. II – Current year loss -30,000
(ii) He has three proprietary businesses:
(a) Textile Business:
(i) Discontinued from 31st October, 2021 – Current year loss 40,000
(ii) Brought forward business loss of A.Y.2017-18 95,000
(b) Chemical Business:
(i) Discontinued from 1st March, 2019 – hence no profit/loss Nil
(ii) Bad debts allowed in earlier years recovered during this year 35,000
(iii) Brought forward business loss of A.Y. 2018-19 50,000
(c) Leather Business: Profit for the current year 1,00,000
(d) Share of profit in a firm in which he is partner since 2008 16,550
(iii) (a) Short-term capital gain 60,000
(b) Long-term capital loss 35,000
(iv) Contribution to LIC towards premium 10,000

Santhosh Thirunavukkarasu
14. Ms. Geeta, a resident individual, provides the following details of her income / losses for the
year ended 31.3.2022:
(i) Salary received as a partner from a partnership firm Rs. 7,50,000. The same was
allowed to the firm.
(ii) Loss on sale of shares listed in BSE Rs. 3,00,000. Shares were held for 15 months &
STT paid on sale and acquisition.
(iii) Long-term capital gain on sale of land Rs. 5,00,000.
(iv) Rs. 51,000 received in cash from friends in party.
(v) Rs. 55,000, received towards dividend on listed equity shares of domestic companies.
(vi) Brought forward business loss of assessment year 2020-21 Rs. 12, 50,000.
Compute gross total income of Ms. Geeta for the Assessment Year 2022-23 and ascertain the
amount of loss that can be carried forward.

15. Mr. P, a resident individual, furnishes the following particulars of his income and other details
for the previous year 2021-22:
(i) Income from salary (computed) 18,000
(ii) Net annual value of house property 70,000
(iii) Income from business 80,000
(iv) Income from speculative business 12,000
(v) Long term capital gain on sale of land 15,800
(vi) Loss on maintenance of race horse 9,000
(vii) Loss on gambling 8,000
Depreciation allowable under the Income-tax Act, 1961, comes to Rs.8,000, for which no
treatment is given above.
The other details of unabsorbed depreciation and brought forward losses (pertaining to A.Y. 21-
22) are:
(i) Unabsorbed depreciation 9,000
(ii) Loss from speculative business 16,000
(iii) Short term capital loss 7,800
Compute the gross total income of Mr. P for the Assessment year 22-23, and the amount of loss
that can or cannot be carried forward.

Santhosh Thirunavukkarasu
Santhosh Thirunavukkarasu
CMA Sums:

1. Compute gross total income of Mr. X in following cases -

Source of income Case I Case II
Income from house property (A) 30,000 40,000
Income from house property (B) -10,000 -25,000
Speculation income 80,000 -70,000
Business income -30,000 50,000
Income from activity of owning & maintaining race-horses business (A) -50,000 10,000
Income from activity of owning & maintaining race-horses business (B) 20,000 -6,000
Income from agricultural business -25,000 10,000
Short term capital gain (transaction A) 30,000 -20,000
Short term capital gain (transaction B) -10,000 5,000
Long term capital gain (transaction A) -30,000 45,000
Long term capital gain (transaction B) 10,000 -2,000
Income from lottery 40,000 -
Income from horse races 10,000 25,000
Income on card games -5,000 -3,000
Interest on securities 20,000 10,000

Case I Case II
Source of income
Details Amount Details Amount

Santhosh Thirunavukkarasu
Santhosh Thirunavukkarasu
2. Compute gross total income of Mr. Jacky from following data -
Source of income Amount
Income under the head ‘Salaries’ 2,60,000
Income from house property (A) 60,000
Income from house property (B) -2,80,000
Speculation income 20,000
Business income -1,30,000
Income from activity of owning and maintaining race-horses -1,50,000
Income from agricultural business -1,25,000
Short term capital gain 30,000
Long term capital gain -1,00,000
Income from lottery 10,000
Income from horse races 1,70,000
Interest on securities after adjusting interest expenses and other expenses -70,000

Santhosh Thirunavukkarasu
3. Smart has computed his tax liability as under –
Particulars Details Amount
Income from business A 4,50,000
Long term capital gain 20,000
Less: Income from business B u/s 71 -10,000 10,000
Income from other sources 50,000
Gross Total Income 5,10,000
Less: Deduction u/s 80C to 80U -
Total Income 5,10,000
Tax liability 15,080
Comment on the above computation.

Santhosh Thirunavukkarasu
4. Mr. Bhola has furnished you the following data –
Income from house property (₹. 1,30,000)
Salaries (Net) ₹. 80,000
Income from other sources (₹. 90,000)
Income from lotteries ₹. 3,50,000
Mr. Bhola is seeking your advice relating to set off and carry-forward.

5. Mr. Tej Singh has the following income details – Rs.

Income from house property -30,000
Salaries 4,80,000
Income from other sources 30,000
He has computed his Gross total income for the A.Y.2021-22 as under
Particulars Amount
Income from house property -10,000
Salaries 4,80,000
Income from other sources 30,000
Gross total income 5,00,000
Carry forward of loss under the head income form H.P. 20,000
– Comment

Santhosh Thirunavukkarasu
 6. Compute Gross total income of Mrs. Shikha from following details for the A.Y.2021-22
Income from house property A 60,000
Income from house property B -1,50,000
Income from house property C 1,00,000
Income from other sources 1,00,000
Losses u/s 22 for the A.Y. 2020-21 -30,000
Losses u/s 22 for the A.Y. 1998-99 -15,000
Losses u/s 56 for the A.Y. 2020-21 -45,000

7. Mr. Arun is running several businesses since last so many years. From the following details,
compute his taxable business income:
Brought Whether Year of disc-
Nature of Year to which
Current year income forward (b/f) business ontinuation
business b/f loss relates
loss continued of business
Readymade
1,00,000 2,30,000 2014-15 Yes NA
garments
1,70,000 2000-01
50000
Retail of cosmetics 80,000 Yes NA
Unabsorbed 2015-16
depreciation
Whole sale of soft-
Nil 80,000 2018-19 No 2017-18
toys
30,000
Wholesale of fruits 70,000 2003-04 No 2003-04
being bad debt recovery
30,000
Optical 70,000 2002-03 No 2003-04
Bad debt recovery
90,000 - - Yes NA
Investment
15,000
business - - Yes NA
Dividend from foreign co.
40,000
Medicines - - No 1995-96
Bad debt recovery
Manufacturing of 2014-15 no
- 40,000 No 2015-16
school uniform return filed

Santhosh Thirunavukkarasu
 8. Compute total income of X Ltd. under following cases –
Business A: Business of Ice cream
Business B: Business consists of purchase and sale of shares of other companies (being
treated as speculative business as per explanation of sec. 73)
Case 1 Case 2 Case 3 Case 4
Particulars
A B A B A B A B
Income of P.Y. 20-21 80,000 20,000 75,000 85,000 -56,000 1,50,000 3,00,000 -50,000
B/f loss of P.Y. 19-20 70,000 65,000 85,000 50,000 90,000 65,000 30,000 90,000
Unabsorbed depreciation - - - - - - - 20,000

Case 1 Case 2 Case 3 Case 4

Particulars
A B A B A B A B

9. MNP Ltd. commenced operations of the business of a new four-star hotel in Chennai on 1-4-20.
The company incurred capital expenditure of ₹ 40 lakh during the period January, 20 to March,
20 exclusively for the above business, and capitalized the same in its books of account as on 1st
April, 20. Further, during the P.Y. 20-21, it incurred capital expenditure of ₹ 2.5 crore (out of
which Rs. 1 crore was for acquisition of land) exclusively for the above business. Compute the
income under the heading “profits and gains of business or profession” for the assessment year
2021-22, assuming that MNP Ltd. has fulfilled all the conditions specified for claim of deduction
u/s 35AD and has not claimed any deduction under Chapter VI-A under the heading “C.-
Deductions in respect of certain incomes”. The profits from the business of running this hotel
(before claiming deduction u/s 35AD) for the A.Y. 2021-22 is ₹80 lakhs. Assume that the company
also has another existing business of running a four-star hotel in Kanpur, which commenced
operations 5 years back, the profits from which was ₹ 130 lakhs for assessment year 2021-22.

Santhosh Thirunavukkarasu
 10. The taxable income under following cases for the A.Y. 2021-22:
Case 1 Case 2 Case 3 Case 4
Particulars
STCG LTCG STCG LTCG STCG LTCG STCG LTCG
Income of the P.Y. 20-21 1,00,000 -30,000 -30,000 1,00,000 1,00,000 -20,000 -30,000 1,00,000
B/f loss of P.Y. 19-20 50,000 - - 50,000 60,000 50,000 10,000 20,000

Computation of taxable income for the A.Y.2021-22

Case 1 Case 2 Case 3 Case 4
Particulars
STCG LTCG STCG LTCG STCG LTCG STCG LTCG

Santhosh Thirunavukkarasu
11. P, Q and R are partners in a firm sharing profits and losses in the ratio of 1:1:2, provide the
following information. Find firm’s net income assuming that salary and interest are not paid to
partners:
i. Net income of the firm in A.Y. 20-21 is (-) ₹1,20,000, out of which unadjusted depreciation
is ₹40,000.
ii. On 31.05.2020, R retires from the firm and the other partners carry on the same business.
iii. Firm’s income for A.Y. 21-22 before adjusting aforesaid loss & depreciation is ₹ 1,20,000.

Santhosh Thirunavukkarasu