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

Sunil has income from a lottery of Rs 50,000 and a business loss of Rs 30,000 from his non-speculative business in tax year 2026-27. He also earns Rs 2,00,000 from other business. What is the position regarding the business loss set-off?

The loss is set off only against the Rs 2,00,000 business income. Lottery winnings are taxed at a special rate and no loss, current or brought forward, can be set off against them, so the Rs 50,000 remains fully taxable.

  1. AThe loss is set off against the Rs 2,00,000 business income only; lottery income cannot be reduced by any lossCorrect
  2. BThe loss is set off against lottery income first
  3. CThe loss is carried forward without any set-off this year
  4. DThe loss is set off proportionately against both incomes

Explanation

Winnings from lotteries and similar income taxable at special rates cannot be reduced by any loss. The current year business loss must therefore be set off against other business income of Rs 2,00,000, leaving Rs 1,70,000, while lottery income of Rs 50,000 remains fully taxable. Other options wrongly allow set-off against lottery income.

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