Explain the provision relating to set off and carry forward of losses
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Introduction:
A person can set off and carry forward the income losses incurred as per the Income Tax Act 1961; it is a big boon to a Person because it plays an important role on the financial condition of a Person who has incurred such Losses. So the legislature affected the provisions of set-off and carry forward of income losses so that an assessee would not have to bear the burden of paying taxes in the case of losses. If income from a particular source is exempt from tax, then loss from such source cannot be set off against any other income which is chargeable to tax.
Note: You cannot be set off your losses from the exempt source of Income against profit from any taxable source of Income, and no losses can be set off against casual income i.e. crossword puzzles, winning from lotteries, races, card games, betting etc.
Meaning of Set off and Carry forward:
Set off means adjusting the losses against the profit of that financial year. Losses can be carried forward to next Assessment Years if there are no adequate profits subject to the conditions stated in the Act.
Income losses Intra-head Set off:
Under Section 70 of Income Tax Act, 1961, if the taxpayer has incurred some loss then the taxpayer is allowed to adjust it from any other source of income under the same head. This process is called intra-head adjustment, e.g. Adjustment of loss from business A against profit from business B.
A person can set off and carry forward the income losses incurred as per the Income Tax Act 1961; it is a big boon to a Person because it plays an important role on the financial condition of a Person who has incurred such Losses. So the legislature affected the provisions of set-off and carry forward of income losses so that an assessee would not have to bear the burden of paying taxes in the case of losses. If income from a particular source is exempt from tax, then loss from such source cannot be set off against any other income which is chargeable to tax.
Note: You cannot be set off your losses from the exempt source of Income against profit from any taxable source of Income, and no losses can be set off against casual income i.e. crossword puzzles, winning from lotteries, races, card games, betting etc.
Meaning of Set off and Carry forward:
Set off means adjusting the losses against the profit of that financial year. Losses can be carried forward to next Assessment Years if there are no adequate profits subject to the conditions stated in the Act.
Income losses Intra-head Set off:
Under Section 70 of Income Tax Act, 1961, if the taxpayer has incurred some loss then the taxpayer is allowed to adjust it from any other source of income under the same head. This process is called intra-head adjustment, e.g. Adjustment of loss from business A against profit from business B.
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