Set Off means using certain losses to reduce the income from other sources in the same assessment year. If some losses cannot be fully utilized in the current year, they can be carried forward to future years for offsetting against income in those years. This is known as Carry Forward. In this article, we've discussed a summary of losses that can be set-off and carry forward and how to add previous years' losses in your Income Tax Return (ITR).
Summary of set-off and carry forward of losses
| Type of Losses | Intra Head Adjustment | Inter Head Adjustment | Carry Forward? | Set-off in next year against? | Time Limit to carry forward | Mandatory to file ITR for carry- forwarding loss? |
| Loss from Salary | Loss from salary is not possible | |||||
| Loss from House Property | Allowed | Allowed, but only up to Rs 2,00,000 | Allowed | Income from House Property | 8 years | No |
| Loss from Speculative Business | Only against speculative business income | Not Allowed | Allowed | Income from Speculative Business | 4 years | Yes |
| Loss from Specified Business | Only against specified business income | Not Allowed | Allowed | Income from specified business | Unlimited | Yes |
| Other Business Losses | Allowed | Allowed (except from Salary income) | Allowed | Income from Normal Business | 8 years | Yes |
| Short Term Capital Loss | Only against STCG & LTCG | Not Allowed | Allowed | STCG & LTCG | 8 years | Yes |
| Long Term Capital Loss | Only against LTCG | Not Allowed | Allowed | LTCG | 8 years | Yes |
| Loss from Owning and Maintaining Race Horses | Only against Income from Owning and Maintaining Race Horses | Not Allowed | Allowed | Income from Owning and Maintaining Race Horses | 4 years | Yes |
| Loss under ‘Other Sources’ | Allowed | Allowed | Not Allowed | N/A | N/A | N/A |
Note: First, you need to make intra-head loss adjustment before considering inter-head loss adjustment.
Procedure to add previous years’ losses in your IT return for the current assessment year
Step 1: Log in to your account on www.easytax.live and link you PAN and add the income details. (Refer to this page for more details)
Step 2: Under ‘Tax Saving’ tab > scroll down to ‘Carry Forward of Losses’ section > click on edit details
Step 3: Here, click on ‘Add Previous Year Losses’ to enter the details of brought forward losses.
Step 4: Select the assessment year (the year in which you had incurred the loss). Then select the loss category from the dropdown menu. Enter the loss amount in negative by prefixing a ‘-’ sign.
Step 5: Similarly, you can also add details of unabsorbed depreciation by clicking on ‘Add Previous Year Depreciation Loss’.
Step 6: Scroll down and click on ‘Edit Dates’ and enter the date on which you had filed your ITR for that year. You can find this date in your previous year's ITR. But if you had filed with Easytax, we will autofill this for you. Once done, click on ‘Save’.
Then, click on ‘Go to Next’ button placed on the right-hand upper corner of the page and proceed to e-filing.