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CA Final · Direct Tax Laws & International Taxation · Aggregation of Income, Set Off or Carry Forward of Losses

Kavita Traders, an individual, has a speculation business loss of Rs 2,00,000 first computed in the tax year 1. Which statement is correct under the Income-tax Act, 2025 about carrying it forward?

A speculation loss can be carried forward, but only for set off against profits of speculation business, and for not more than four tax years immediately succeeding the tax year in which the loss was first computed.

  1. AIt can be carried forward indefinitely against any business income
  2. BIt can be carried forward for not more than four tax years immediately succeeding tax year 1, against speculation business profits onlyCorrect
  3. CIt can be carried forward for eight tax years against speculation profits
  4. DIt cannot be carried forward and lapses if not set off in tax year 1

Explanation

Section 113(2) allows carry forward to following years for set off against speculation business profits. Section 113(3) caps the period at four tax years immediately succeeding the year the loss was first computed. The eight-year option is wrong, as that is not the period for speculation loss.

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