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

Meera Textiles, a resident partnership firm, has for tax year 2026-27 income from a non-speculative business of Rs 5,00,000 (before adjusting any loss), a current-year speculative business loss of Rs 1,50,000, and a short-term capital gain of Rs 2,00,000. It has no other income or brought-forward losses. What is its gross total income for the tax year?

Gross total income is Rs 7,00,000. The speculative loss of Rs 1,50,000 can be set off only against speculative business income, which the firm does not have, so it cannot reduce the Rs 5,00,000 business income or the Rs 2,00,000 capital gain and is carried forward.

  1. ARs 5,50,000
  2. BRs 7,00,000Correct
  3. CRs 3,50,000
  4. DRs 5,00,000

Explanation

A speculative business loss can be set off only against speculative business income. There is none this year, so the Rs 1,50,000 loss cannot be set off against non-speculative business income or capital gains and is carried forward. Gross total income = 5,00,000 + 2,00,000 = Rs 7,00,000. Rs 5,50,000 wrongly deducts the loss from the capital gain.

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