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

Kavya Enterprises (proprietary) has the following for tax year 2026-27: salary Nil, business income from a manufacturing unit Rs 4,50,000 (profit), and a brought forward business loss of Rs 1,80,000 from tax year 2024-25 (return was filed on time that year). It also has an unabsorbed depreciation brought forward of Rs 1,00,000 from tax year 2023-24 and a short-term capital gain of Rs 70,000 in the current year. What is the gross total income for tax year 2026-27 after adjusting brought forward items in the permitted order?

Gross total income is Rs 2,40,000. Business profit of Rs 4,50,000 is reduced by the brought forward business loss of Rs 1,80,000 and unabsorbed depreciation of Rs 1,00,000, leaving Rs 1,70,000, and the short-term capital gain of Rs 70,000 is added.

  1. ARs 2,40,000Correct
  2. BRs 1,70,000
  3. CRs 3,10,000
  4. DRs 2,00,000

Explanation

Current year business income is Rs 4,50,000. Brought forward business loss of Rs 1,80,000 is set off against business profit only, leaving Rs 2,70,000. Unabsorbed depreciation of Rs 1,00,000 is then set off against any head, so it reduces this to Rs 1,70,000. Adding capital gain Rs 70,000 gives Rs 2,40,000.

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