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

Meera owns and maintains race horses. In tax year 2026-27 her stake money was Rs 3,00,000 and her revenue expenditure wholly and exclusively for maintaining the horses was Rs 5,00,000. She also has salary income of Rs 8,00,000. What is the position?

The loss is Rs 2,00,000, being maintenance expenditure of Rs 5,00,000 less stake money of Rs 3,00,000. It cannot be set off against salary. It is carried forward and set off only against income from owning and maintaining race horses, for up to four succeeding tax years.

  1. ALoss of Rs 2,00,000 is set off against salary, leaving Rs 6,00,000
  2. BLoss of Rs 2,00,000 is carried forward and set off only against income from owning and maintaining race horsesCorrect
  3. CLoss of Rs 5,00,000 is carried forward for any number of years
  4. DLoss of Rs 2,00,000 is ignored and never allowed to be carried forward

Explanation

Loss in the specified activity is stake money short of the revenue expenditure of maintenance: 5,00,000 - 3,00,000 = Rs 2,00,000. Under section 115 it can be set off only against income from that activity and is carried forward for at most four succeeding tax years. Salary is not reduced, so option A is wrong.

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