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CA Intermediate · Taxation · Set-Off or Carry Forward and Set-off of Losses

For tax year 2026-27, a firm's business profit before current depreciation is Rs 3,00,000 and current depreciation is Rs 1,00,000. It has a brought forward business loss of Rs 1,50,000 and brought forward unabsorbed depreciation of Rs 90,000. It also has interest income of Rs 30,000 and no salary income. How much unabsorbed depreciation remains to be carried forward?

Rs 10,000 of unabsorbed depreciation is carried forward. Current depreciation and the brought forward business loss reduce business income to Rs 50,000, which unabsorbed depreciation absorbs. The remaining Rs 40,000 of depreciation is set off against interest income of Rs 30,000, leaving Rs 10,000.

  1. ARs 40,000
  2. BRs 60,000
  3. CRs 10,000Correct
  4. DNil

Explanation

Business income after current depreciation is Rs 2,00,000. The brought forward business loss of Rs 1,50,000 is set off first, leaving Rs 50,000. Unabsorbed depreciation of Rs 90,000 then absorbs Rs 50,000 against business income, and the balance Rs 40,000 is set off against interest income of Rs 30,000. The carry forward is Rs 10,000. Option A ignores set-off against other heads.

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