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CS Executive · Tax Laws and Practice · Clubbing Provisions and Set Off and Carry Forward of Losses

Aarav Traders has a loss of Rs 5,00,000 from a specified business in a tax year and no profit from any other specified business in that year. Under section 114 of the Income-tax Act, 2025, what happens to the loss?

The unabsorbed loss is carried forward to the next tax year and set off against profits of any specified business he carries on, and this continues year after year. Section 114 contains no four-year cap, unlike the speculation business and specified activity provisions.

  1. AIt is carried forward to the following tax year and set off against profits of any specified business carried on by him, and so onCorrect
  2. BIt is set off against his profits from ordinary business in the same year
  3. CIt lapses at the end of the tax year
  4. DIt is carried forward for a maximum of four tax years only

Explanation

Section 114(2) allows the unabsorbed loss to be carried forward to the following tax year and set off against profits of specified business, continuing in the same way. Unlike sections 113 and 115, section 114 contains no four-year limit, so the fourth option is wrong.

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