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

Sunita Bose has the following for tax year 2026-27: income from business (non-speculative) Rs 3,00,000 before adjustments; speculative business loss of the year Rs 1,10,000; brought forward non-speculative business loss Rs 1,80,000 (within 8 years). She has no other income. What is her total income and the speculation loss position?

Total income is Rs 1,20,000 and the Rs 1,10,000 speculative loss is carried forward. The brought forward business loss of Rs 1,80,000 reduces the Rs 3,00,000 profit, but a speculative loss can be set off only against speculative business income.

  1. ATotal income Rs 1,20,000; speculation loss Rs 1,10,000 carried forwardCorrect
  2. BTotal income Rs 10,000; nil carry forward
  3. CTotal income Rs 1,90,000; brought forward loss fully absorbed
  4. DTotal income Rs 3,00,000; both losses carried forward

Explanation

Speculative loss can be set off only against speculative income, so it cannot reduce the non-speculative profit; Rs 1,10,000 is carried forward (up to 4 years). The brought forward non-speculative business loss of 1,80,000 is set off against 3,00,000, leaving Rs 1,20,000. Rs 10,000 wrongly nets the speculative loss as well.

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