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CS Executive · Tax Laws and Practice · Clubbing Provisions and Set Off and Carry Forward of Losses

Under the Income-tax Act, 2025, Arjun has a loss of ₹90,000 in the current year from a speculation business and, in the following year, profits of ₹50,000 from a different speculation business and ₹4,00,000 from a non-speculation business. Assuming the loss was carried forward within the permitted period, how much of the carried forward loss remains after set off in the following year?

₹40,000 remains. The carried forward speculation loss of ₹90,000 can be set off only against speculation business profit of the following year, which is ₹50,000. The non-speculation profit of ₹4,00,000 cannot be used, so the balance of ₹40,000 is carried forward further.

  1. A₹40,000Correct
  2. B₹0
  3. C₹90,000
  4. D₹4,40,000

Explanation

Section 113(2) allows the carried forward loss to be set off only against profits of speculation business of the later year. Only ₹50,000 of speculation profit exists, so 90,000 − 50,000 = ₹40,000 remains to be carried forward. The non-speculation profit cannot absorb it.

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