Carry forward and set off of business loss - Section 72 - Income Tax - Ready Reckoner - Income Tax

Carry forward and set off of business loss - Section 72 Where the loss under the head PGBP (other than the loss from speculation business and specified business u/s 35AD ), could not be set off in the same AY, because either the assessee had no income under any other head or the income was less than the loss, then such loss can be carried forward to the following AYs and can be set off only against the PGBP income. The losses can be carried forward till 8 Assessment Years. Notes: Business losses can be adjusted only against business income. Loss can be carried forward even if business has been discontinued. Losses can be set off only by the assessee who has incurred the loss except in the case of Inheritance, Amalgamation, succession and demerger Unabsorbed depreciation, Unabsorbed capital expenditure on scientific research and unabsorbed capital expenditure on family planning can also be carried forward indefinitely although it is not a business loss. The return of loss must have been furnished before the date prescribed u/s 139(1) , otherwise the loss cannot be carried forward. Period of carry forward: Each year's loss is a separate loss and no loss shall be carried forward for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed. Order of Set off: First - Current year depreciation [ Section 32(1) ] Second - Current year capital expenditure on scientific research and current year expenditure on family planning. Third - brought forward business or profession losses [ Section 72(1) ] Fourth - unabsorbed depreciation [ Section 32(2) ] Fifth - unabsorbed capital expenditure on scientific research [ Section 35(4) ] Sixth - unabsorbed capital expenditure on family planning [ Section 36(1)(xi) ]