Set off of loss from one source against income from another source under the same head of income.

1. (1) Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income, other than “Capital gains”, is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head.
2. (2) Where the result of the computation made for any assessment year under sections 48 to 55in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset.
3. (3) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a short-term capital asset) is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset not being a short-term capital asset.] 1[71.Set off of loss from one head against income from another.—(1) Where in respect of any assessment year the net result of the computation under any head of income, other than “Capital gains”, is a loss and the assessee has no income under the head “Capital gains”, he shall, subject to the provisions of this Chapter, be entitled to have the amount of such loss set off against his income, if any, assessable for that assessment year under any other head.
4. (2) Where in respect of any assessment year, the net result of the computation under any head of income, other than “Capital gains”, is a loss and the assessee has income assessable under the head “Capital gains”, such loss may, subject to the provisions of this Chapter, be set off against his income, if any, assessable for that assessment year under any head of income including the head “Capital gains” (whether relating to short-term capital assets or any other capital assets). 2[(2A) Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect of any assessment year, the net result of the computation under the head “Profits and gains of business or profession” is a loss and the assessee has income assessable under the head “Salaries”, the assessee shall not be entitled to have such loss set off against such income.]
5. (3) Where in respect of any assessment year, the net result of the computation under the head “Capital gains” is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to have such loss set off against income under the other head.] 3[(3A) Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect of any assessment year, the net result of the computation under the head “Income from house property” is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to set off such loss, to the extent the amount of the loss exceeds two lakh rupees, against income under the other head.] 4[(4) Where the net result of the computation under the head “Income from house property” is a loss, in respect of the assessment years commencing on the 1st day of April, 1995 and the 1st day of April, 1996, such loss shall be first set off under sub-sections (1) and (2) and thereafter the loss referred to in section 71A shall be set off in the relevant assessment year in accordance with the provisions of that section.] 5[71A.Transitional provisions for set off of loss under the head “Income from house property”.—Where in respect of the assessment year commencing on the 1st day of April, 1993 or the 1st day of April, 1994, the net result of the computation under the head “Income from house property” is a loss, such loss in so far as it relates to interest on borrowed capital referred to in clause (vi) of sub-section (1) of section 24 and to the extent it has not been set off shall be carried forward and set off in the assessment year commencing on the 1st day of April, 1995, and the balance, if any, in the assessment year commencing on the 1st day of April, 1996, against the income under any head.] 1[71B.Carry forward and set off of loss from house property.—Where for any assessment year the net result of computation under the head “Income from house property” is a loss to the assessee and such loss cannot be or is not wholly set off against income from any other head of income in accordance with the provisions of section 71, so much of the loss as has not been so set-off or where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year and—
   • (i) be set off against the income from house property assessable for that assessment year; and
   • (ii) the loss, if any, which has not been set off wholly, the amount of loss not so set off, shall be carried forward to the following assessment year, not being more than eight assessment years immediately succeeding the assessment year for which the loss was first computed.] 72.Carry forward and set off of business losses.—2[(1) Where for any assessment year, the net result of the computation under the head “Profits and gains of business or profession” is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or, 3*** where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and—
   • (i) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year; 4*
   • (ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on:] 5[Provided that where the whole or any part of such loss is sustained in any such business as is referred to in section 33B which is discontinued in the circumstances specified in that section, and, thereafter, at any time before the expiry of the period of three years referred to in that section, such business is re-established, reconstructed or revived by the assessee, so much of the loss as is attributable to such business shall be carried forward to the assessment year relevant to the previous year in which the business is so re-established, reconstructed or revived, and—
   • (a) it shall be set off against the profits and gains, if any, of that business or any other business carried on by him and assessable for that assessment year; and 3. The words, brackets and figure ‘where the assesse has income only under the head “capital gains” relating to capital assets other than short-term capital assets and has exercised the option under sub-section (2) of that section or’ omitted by Act 11 of 1987, s. 30 (w.e.f. 1-4-1988). 4. The proviso omitted by Act 27 of 1999, s. 37 (w.e.f. 1-4-2000). 5. Added by Act 20 of 1967, s. 22 (w.e.f. 1-4-1967).
   • (b) if the loss cannot be wholly so set off, the amount of loss not so set off shall, in case the business so re-established, reconstructed or revived continues to be carried on by the assessee, be carried forward to the following assessment year and so on for seven assessment years immediately succeeding.]
6. (2) Where any allowance or part thereof is, under sub-section (2) of section 32 or sub-section (4) of section 35, to be carried forward, effect shall first be given to the provisions of this section.
7. (3) No loss 1[(other than the loss referred to in the proviso to sub-section (1) of this section)] shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed.

¹ Subs. by Act 4 of 1988, s. 2, for “Income-tax Officer” (w.e.f. 1-4-1988).

² Ins. by Act 10 of 1965, s. 19 (w.e.f. 1-4-1965).

³ Ins. by Act 41 of 1975, s. 14 (w.e.f. 1-4-1976).

⁴ Ins. by Act 21 of 1998, s. 25 (w.e.f. 1-4-1999).

⁵ Subs. by Act 20 of 2002, s. 27, for section 70 (w.e.f. 1-4-2003).

¹ Subs. by Act 49 of 1991, s. 23, for section 71 (w.e.f. 1-4-1992).

² Ins. by Act 23 of 2004, s. 14 (w.e.f. 1-4-2005).

³ Ins.by Act 7 of 2017, s. 31 (w.e.f. 1-4-2018).

⁴ Subs. by Act 32 of 1994, s. 21, for sub-section (4) (w.e.f. 1-4-1995).

⁵ Subs. by s. 22, ibid., for section 71A (w.e.f. 1-4-1995).

¹ Ins. by Act 21 of 1998, s. 26 (w.e.f. 1-4-1999).

² Subs. by Act 20 of 1962, s. 6, for sub-section (1) (w.e.f. 1-4-1962).