CMA Intermediate · Direct and Indirect Taxation · Set off and Carry Forward of Losses
Ravi Associates had a speculation loss of Rs 1,20,000 first computed for tax year 2026-27, with no speculation profit in that year. Speculation profits of Rs 20,000 arose in 2027-28, nil in 2028-29, Rs 30,000 in 2029-30, nil in 2030-31, and Rs 1,00,000 in 2031-32. It has no other speculation losses. Under the Income-tax Act, 2025, what loss is available to set off against the 2031-32 speculation profit?
Nothing is available. The loss can be carried forward only to the four tax years after 2026-27, that is up to 2030-31. The Rs 70,000 balance left after set offs of Rs 20,000 and Rs 30,000 lapses before 2031-32.
- ARs 70,000
- BRs 1,00,000
- CNilCorrect
- DRs 50,000
Explanation
Loss for 2026-27 can be carried forward only for four tax years immediately succeeding it: 2027-28 to 2030-31. Set off: Rs 20,000 in 2027-28 and Rs 30,000 in 2029-30, total Rs 50,000, leaving Rs 70,000. 2031-32 is the fifth succeeding year, so the balance lapses and nothing is available. Rs 70,000 ignores the four-year limit.
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