Carry Forward of Losses

Carry Forward of Losses is a provision that allows taxpayers to carry unabsorbed losses to future assessment years and set them off against future income. This ensures that genuine business losses do not result in undue tax burden when profits are earned in subsequent years.

Time Limits for Carry Forward

Type of Loss	Can be carried forward for	Can be set off against
House Property Loss	8 Assessment Years	Income from House Property
Business Loss (Non-speculative)	8 Assessment Years	Business Income
Speculative Business Loss	4 Assessment Years	Speculative Business Income only
Capital Loss (Short-term)	8 Assessment Years	STCG and LTCG
Capital Loss (Long-term)	8 Assessment Years	LTCG only
Loss from Owning Race Horses	4 Assessment Years	Income from Race Horses only

Conditions for Carry Forward

• Return Filing: Loss can only be carried forward if the return is filed on time (by due date)
• Continuity of Business: Not mandatory for most losses, but some business losses require business continuation
• Same Assessee: Losses generally cannot be transferred; they belong to the specific assessee
• Business Succession: Inheritance and succession have specific rules for loss carry forward

Losses That CANNOT Be Carried Forward

• Loss from Other Sources: Cannot be carried forward (except race horse loss)
• Unabsorbed Depreciation: Can be carried forward indefinitely (no time limit)
• Unabsorbed Capital Expenditure on Scientific Research: Can be carried forward indefinitely

Special Provisions

• Business Reorganization: Special rules for amalgamation, demerger, and business succession
• Start-ups: Extended period for set-off of losses subject to continuity of shareholding
• Change in Constitution: Firm to company conversion has specific provisions