Definition
Set-Off and Carry Forward of Losses
These rules let taxpayers adjust losses against income of the same or future years, subject to conditions on the type of loss and how long it can be carried forward.
Indian tax law lets a taxpayer set off a loss under one head against income, within limits, in the same year, and carry forward unabsorbed losses to future years to reduce tax then. Different rules govern business losses, capital losses, speculative losses and house-property losses, including how many years each can be carried and what it can offset.
Carrying forward usually requires filing the return on time. For investors, the treatment of short-term and long-term capital losses against the matching kind of gains is especially important for tax planning around portfolio churn.
Related terms
- Tax Audit (44AB)Section 44AB requires businesses and professionals above specified turnover or receipt thresholds to get their accounts audited by a chartered accountant.
- Advance TaxAdvance tax is income tax paid in instalments during the financial year as income is earned, rather than in a lump sum after the year ends.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.