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

Which statement about the principle that a loss from speculation business under the Income-tax Act, 2025 can be set off only against another speculation business is correct, and how does it differ from clubbing of income?

A speculation loss is set off only against profits of another speculation business and may be carried forward for no more than four tax years immediately following the year of loss. This is a set-off rule, unlike clubbing, which decides whose total income includes certain income.

  1. AA speculation loss can be set off against salary income, so the rule is the same as clubbing
  2. BA speculation loss is set off only against profits of another speculation business and can be carried forward for not more than four tax years immediately succeeding the year it was first computed, whereas clubbing concerns whose hands income is taxedCorrect
  3. CA speculation loss can be carried forward indefinitely against any business income
  4. DA speculation loss is first clubbed with the spouse's income before being set off

Explanation

Section 113 restricts set-off of speculation loss to speculation profits and limits carry forward to four succeeding tax years. Clubbing is a different concept: it decides in whose hands income is taxed. Indefinite carry forward and set off against salary are not permitted.

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