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CMA Intermediate · Direct and Indirect Taxation · Income from House Property

Ms. Kavita had a house property loss of Rs 1,80,000 carried forward from the earlier tax year. In the current tax year she has income from house property of Rs 70,000 from a let-out flat, salary income of Rs 6,00,000 and business income of Rs 1,00,000. How much of the brought forward loss is set off in the current tax year and what remains to be carried forward?

Rs 70,000 of the brought forward loss is set off against the current house property income, and Rs 1,10,000 is carried forward. Salary and business income cannot absorb it, because the carried-forward loss is set off only against income from house property.

  1. ASet off Rs 70,000; carry forward Rs 1,10,000Correct
  2. BSet off Rs 1,80,000; carry forward nil
  3. CSet off Rs 1,70,000 against salary and business; carry forward Rs 10,000
  4. DSet off Rs 70,000; carry forward Rs 1,80,000

Explanation

The brought forward loss can be set off only against income from house property, which is Rs 70,000. Remaining loss is 1,80,000 - 70,000 = Rs 1,10,000, carried forward further. Setting off against salary or business is not allowed under section 110.

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