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Tax laws on carry forward of losses that will benefit you

As mentioned in my blog post 'Set-off the losses and slash your taxes'
a) the Income Tax Act allows you to adjust the losses during a particular financial year against incomes in that year; and
b) you can carry forward the unadjusted losses to the subsequent financial years.

While we had discussed the Income Tax provisions regarding set-off of losses and incomes in the same financial year, let us now look at the provisions relating to carry forward of losses and set-off against future incomes.

Carry forward and set-off of loss under House Property
- If you cannot adjust the loss under the head 'Income from House Property' in a particular financial year, you are allowed to carry it forward to the next financial year.
- You can do so for the next 8 years.
- Such carried forward loss can be adjusted "intra-head" only i.e. only against income from house property. (This is unlike the set-off in the same financial year, when you can inter-head adjust house property loss against salary etc.).

Carry forward and set-off of Capital Loss 
- If you cannot adjust the loss under the head 'Capital Gains' in a particular financial year, you are allowed to carry it forward to the next financial year.
- You can do so for the next 8 years.
- Such carried forward capital loss can be adjusted "intra-head" only i.e. only against capital gains. However, long-term capital loss can be adjusted only against long-term capital gains; while short-term capital loss can be adjusted both against short-term and long-term capital gains.

Note
1. You can carry forward the Capital Loss ONLY if you have filed your Income Tax Returns for that year, on or before the due date prescribed for filing of tax returns. This restriction, however, does not apply to carry forward of the house property loss.

2. Even for loss from Business or Profession (both non-speculative and speculative) the carry forward is permitted only if the returns are filed on or before the prescribed due date.

3. While the loss from non-speculative Business or Profession can be carried forward for next 8 years, loss from speculative business can be carried forward for the next 4 years only.

4. Loss from salary income is not applicable and loss, if any, under the head 'income from other sources' cannot be carried forward.

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