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CMA Intermediate · Direct and Indirect Taxation · Set off and Carry Forward of Losses

Under the Income-tax Act, 2025, for how many tax years immediately succeeding the tax year in which it was first computed can a loss under the head 'Capital gains' be carried forward?

A capital loss can be carried forward for eight tax years immediately following the tax year in which it was first computed, as laid down in section 111(2). The four-year limit applies to speculation and race-horse losses, not to capital losses.

  1. AFour tax years
  2. BEight tax yearsCorrect
  3. CIndefinitely, until it is fully set off
  4. DTwo tax years

Explanation

Section 111(2) provides that no capital loss is carried forward for more than eight tax years immediately succeeding the tax year for which it was first computed. Four years applies to speculation losses and losses from the specified activity of owning and maintaining race horses, so it is not the period for capital losses.

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