Carry Forward of Losses – Important Points
Table of Contents
Carry Forward of Losses – Important Points
- House Property Loss : Carry forward allowed for 8 years. Can be carried forward even in belated returns (filing on time not mandatory).
- Speculation Loss : Can be carried forward for 4 years. & Filing return on time is mandatory.
- Business Loss (Non-speculative) :
- Normal business loss: 8 years carry forward.
- Specified business loss u/s 35AD: No time limit.
- Unabsorbed depreciation & certain expenses: No time limit.
- Filing return on time is mandatory (except unabsorbed depreciation & specified business u/s 35AD).
- Capital Loss : Both STCG and LTCG losses: 8 years carry forward. Filing return on time is mandatory.
- Owning & Maintaining Racehorses : Loss carry forward for 4 years., Filing return on time is mandatory.
- No Audit Requirement : You do not need to get your accounts audited merely to carry forward losses. & Tax audit and carry forward of losses are independent compliance requirements.
- Link with Return Filing : The carry forward of losses is allowed only if the Income Tax Return is filed within the original due date (generally 31st July / 31st October, depending on the case). If the return is filed after the due date (belated return), certain losses cannot be carried forward.
- Losses Affected
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- Loss under “Profits and Gains of Business or Profession” (except unabsorbed depreciation).
- Loss under “Capital Gains”.
- Loss from owning and maintaining race horses.
9. Losses Still Allowed in Belated Return
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- House property loss and unabsorbed depreciation can still be carried forward even if the return is belated.
Simplified Rule of Thumb- Carry Forward of Losses
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- Filing within the original due date (31st July / 31st October depending on audit applicability) is essential if the assessee wants to preserve carry forward rights for business loss, capital loss, speculation loss, and racehorse loss.
- House property loss and unabsorbed depreciation remain unaffected by the timing.
- Losses that require timely return filing (Original Due Date):
- Business loss (except unabsorbed depreciation)
- Speculation loss
- Capital loss
- Loss from racehorses
- Losses that can be carried forward even in a Belated Return:
- House property loss
- Unabsorbed depreciation
- Loss from specified business (u/s 35AD)
Carry Forward of Losses – Original vs Belated Return
Type of Loss | If ITR filed within Original Due Date | If ITR filed after Due Date (Belated Return) |
Business Loss (other than unabsorbed depreciation) | Allowed to carry forward | Not allowed |
Speculation Loss | Allowed to carry forward | Not allowed |
Loss under the head “Capital Gains” | Allowed to carry forward | Not allowed |
Loss from owning & maintaining race horses | Allowed to carry forward | Not allowed |
House Property Loss | Allowed to carry forward | Allowed (even in belated return) |
Unabsorbed Depreciation (u/s 32) | Allowed to carry forward | Allowed (even in belated return) |
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