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

Meenakshi Traders Pvt Ltd, an Indian company, has a tax year in which its speculation business shows a loss of Rs 6,00,000, while its normal (non-speculation) business shows a profit of Rs 9,00,000 and it has no other income. Its principal business is not trading in shares or banking. Under the Income-tax Act, 2025, what is the treatment of the speculation loss for this tax year?

The Rs 6,00,000 speculation loss cannot be set off against normal business profit. It can be set off only against profits of another speculation business, so it is carried forward in full and the whole Rs 9,00,000 normal profit is taxed in the current year.

  1. ASet off against the Rs 9,00,000 normal business profit, leaving Rs 3,00,000 taxable
  2. BCarried forward in full, with Rs 9,00,000 taxed for the yearCorrect
  3. CSet off 50% against normal business profit and the rest carried forward
  4. DAllowed to be carried forward only if the company files a revised return

Explanation

Section 113(1) permits a speculation business loss to be set off only against profits of another speculation business. There is no speculation profit this year, so the loss of Rs 6,00,000 is carried forward under section 113(2) and Rs 9,00,000 is taxed. Option A ignores this restriction.

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