CLUBBING OF INCOME AND

SET OFF AND CARRY

FORWARD OF LOSSES

Name: Tanisha Behera

Roll No.: 2205044
CLUBBING OF
INCOME
Main Points:
• Section 60 to section
65
• Income of the other
person is included in
the income of the
assesses
 SITURATIONS IN CASE OF
CLUBBING OF INCOME
• Transfer of income without transfer of Asset (Section
60)
• Income arising form Revocable transfer of asset (Sec
61) neome by way of Remuneration from a concern in
which individual • si has substantial interest (Section
• of
• tricome arising to spouse from ait asser transferred
without adequate consideration
• Section 64(1) (4) - other then House pranasty
• Transfer of asset for the benefit of spouse Section
64(1) (7)
• treome arising to sons wife fron the asse transferred
without adequate consideration the father-in-law or
mother-in-law Section 6‹
• Transfer of asset for the benefit of sons wife Section
64(1) (8)
 CLUBBING OF
MINOR’S INCOME
UNDER SEC (1A)
All Income of the minor is included in the income of
his parent.

The income of the minor will be included in the

income of that parent, whose income is greater.

It will continued to be included in that parent income

Sec 10 (32) exemption in respect of clubbed income
of minor
1500 exemption in respect of each minor child.
However, if the income is less than 1500 so entire
amount is exempt from tax.
 CROSS TRANSFERS
Conversation of self-
Transfer with mutual acquired property to
understanding. property of Hindu
undivided family Sec
(64(2)).

• INCOME INCLUDES LOSS

The income mentioned under section 64 (1) and section 64
(2) would also
include loss as per explanations given. Cases wherein the
specified
income derived is a loss then such loss should be taken into
account while
calculating the total income of the individual.
 STEPS TO SET UP LOSSES

Step1: Intra source adjustment Step2: Inter-

head Adjustment
Step3: Carry forward of loss only if a loss cannot
be set of under Step1 and step 2
• However, Inter source set off is not
permissible under following cases
Long term capital loss (Section 70(3))
Short term capital loss is allowed to be set off
against both the short term capital gain and
long term capital gain. However, long term
capital loss can be set-off only against long term
capital gain.
•Speculation loss (section 73(1))
Note: Losses from other business can
be adjusted against Profits from
speculation business.
• Loss from owning and
maintaining of race horses
(Section 74 A (3))
• Loss from Specified business
(Section 73A(1))
Note: Specified Business Specified us
Sec 35AD
INTERHEAD ADJUSTMENT
(SEC71)
• Loss under one head of income can be adjusted or set
off against income under another head.
1. Note: where the net results of the computation under
any head of income (other than 'capital gains') is a loss,
the assesses can set off such loss against his income
assessable for that assessment year under any head,
including capital gains.
Il. Profit and gains of business and profession loss can
not
be setoff against income from "salaries".
III. Capital gain loss that loss can not set-off against
income
under any other head.
Maximum loss from house property which can be set-off
against income from any other head is Rs. 2 Lakhs.
V. Speculation loss, loss from the activity of owning and
maintaining of race horse and loss from specified
business (sec 35AD) cannot be set off against income
under any other head.
→ SET OFF AND CARRY FORWARD OF LOSSES FROM HOUSE
PROPERTY(SEC 71B)
• Up to 2lakh is set off against any head of income during
the same year. Unabsorbed loss will be carried forward to
fallowing assessment year to be set off against same
head only. Loss can be carried forward up to 8 assessment
years immediately succeeding assessment year in which
loss was first computed.
• It is to be Remembered that once particular loss is
carried forward, it can be only set off against the income
from same head in forthcoming assessment years.
-ISSES SEE CARE BUSINESS
• The successor of the business can not carry forward or
set off losses of his predecessor except in case succession
by inheritance.
• A business loss can be carried forward for a maximum
period of 8 assessment years.
Set off and carry forward of accumulated loss and/or unabsorbed
Depreciation in Amalgamation
(Sec 72A)
• Conditions to carry forward of losses
1. Company owning an industrial undertaking or ship or a hotel with another
company; or
2. Amalgamation of a public sector company or a company engaged in the
business of operating aircraft with another public sector company or
company engaged in similar business; or
3. Amalgamation of a banking company with a specified bank.
• Amalgamated company has to fulfill the following conditions to avail the
benefit:
1. It continuously holds 75% of the book value of the fixed assets acquired in
a scheme of amalgamation for at least five years from the date of
amalgamation
2. It continues to carry on business of amalgamating company for at least five
years from the date of amalgamation
3. It achieves at least the level of 50% of the installed capacity before the end
of 4 years from the date of amalgamation and maintains that level till the
5th year
• Amalgamating company has to fulfill the following conditions:
4. It was engaged in the business in which the accumulated loss has
occurred or the unabsorbed depreciation remains unabsorbed for three or
more years.
5. It has continuously held 75% of the book value of fixed assets held by it
two years prior to amalgamation.
→ SET OFF AND CARRY FORWARD OF LOSSES IN SPECULATION
BUSINESS (SEC 73)
• Loss from speculation business neither set off in the same year against
any other non-speculation income nor can be carried forward and set of
against other income in the subsequent years.
• Speculation business is exclusive area it cannot be set off with any other
source of income.
→ SET OFF AND CARRY FORWARD OF LOSSES IN
SPECIFIED BUSINESS (SEC 73A)
• Loss from specified business shall be set off only against profits and gains
of other specified business gains only. Losses can be carried forward to
indefinite numbers of years for set off against income form specified
business only.
• Return of income is must in case of carry forward of loss under section
1.39(1)
→ SET OFF AND CARRY FORWARD OF LOSSES CAPITAL GAINS
(SEC 74)
• Short term capital loss can be set off against any capital gains.
• Long term capital loss only set off against only long term capital
gain only.
• Net loss under the head capital gains cannot be set off against
income under any other head.
• Any unabsorbed losses can be carried forward to the 8
assessmerkyeasWARD OF LOSSES ACTIVITY OF OWNING
AND MAINTAINING OF RACE HORSES (SEC
• 74A(3))
• Losses can be carried forward for a maximum period of 4
assessment years.
Order of Set off and carry forward of losses
• As per the provision of section 72(2) brought forward business loss is
to be set-off before setting off unabsorbed depreciation. Therefore the
order in which set-off will be effected is as follows.
1. Current year depreciation/Current year capital expenditure on
scientific research and current year expenditure on family planning,
to the extent allowed.
2. Brought forward loss from business/ Profession
3. (Section 72 (1))
4. Unabsorbed depreciation (Section 32(2))
5. Unabsorbed Capital Expenditure on scientific research (section
35(4) )
6. Unabsorbed capital expenditure on family planning
7.(sec 36 (1) (ix))
THANK YOU