Carry Forward of Losses: Detailed Explanation

Filing your ITR allows you to carry forward various types of losses to offset them against future gains, thereby reducing your overall tax liability. Below is a detailed explanation of how this works for different types of losses, including the relevant sections of the Income Tax Act:

1. Carry Forward of Losses in the Share Market

Types of Share Market Losses:

  • Short-Term Capital Losses (STCL): Losses from the sale of assets held for 36 months or less.
  • Long-Term Capital Losses (LTCL): Losses from the sale of assets held for more than 36 months.

Rules and Details:

  • Section 74: Allows the carry forward of capital losses.
    • STCL can be set off against both STCG and LTCG.
    • LTCL can only be set off against LTCG.
    • Both STCL and LTCL can be carried forward for up to 8 years.

Example: Mr. Agarwal incurs a short-term capital loss of ₹1,00,000 from the sale of shares in FY 2022-23. He has a short-term capital gain of ₹50,000 in FY 2023-24. He can set off the loss against this gain and carry forward the remaining ₹50,000 to future years, reducing his taxable income for those years.

2. Carry Forward of Losses from House Property

Rules and Details:

  • Section 71B: Allows the carry forward of losses from house property.
    • House property losses can be carried forward for up to 8 years.
    • These losses can only be set off against income from house property in subsequent years.

Example: Ms. Rao incurs a loss of ₹2,00,000 from her rented property due to interest payments on a home loan in FY 2022-23. She has no house property income in the same year. She can carry forward this loss and set it off against any future house property income for up to 8 years.

3. Carry Forward of Losses from Futures and Options (F&O)

Types of F&O Losses:

  • Speculative Business Loss: Losses from intraday trading.
  • Non-Speculative Business Loss: Losses from trading in futures and options.

Rules and Details:

  • Section 73: Allows the carry forward of speculative business losses.
    • Can be carried forward for up to 4 years.
    • Can only be set off against speculative business income.
  • Section 72: Allows the carry forward of non-speculative business losses.
    • Can be carried forward for up to 8 years.
    • Can be set off against any business income.

Example: Mr. Shah incurs a loss of ₹1,00,000 from F&O trading in FY 2022-23. He has business income of ₹50,000 in FY 2023-24. He can set off the F&O loss against this business income and carry forward the remaining ₹50,000 to future years, thereby reducing his taxable income for those years.

4. Carry Forward of Losses from Intraday Trading

Rules and Details:

  • Section 73: Intraday trading is considered speculative business.
    • Speculative business losses can be carried forward for up to 4 years.
    • These losses can only be set off against speculative business income.

Example: Ms. Mehta incurs an intraday trading loss of ₹1,00,000 in FY 2022-23. She earns a speculative profit of ₹40,000 from intraday trading in FY 2023-24. She can set off the loss against this profit and carry forward the remaining ₹60,000 to future years.

Benefits of Filing with Bharat Tax Services

By choosing Bharat Tax Services for your ITR filing, you can ensure that all your losses are accurately reported and carried forward, maximizing your tax benefits:

  • Expert Guidance: Our team of experienced tax professionals will provide personalized advice and assistance.
  • Accuracy and Compliance: We ensure that your returns comply with all relevant tax regulations.
  • Maximized Refunds and Tax Savings: Our thorough review process helps you claim all eligible deductions and carry forward losses, optimizing your tax savings.

For more information or to get started with your ITR filing, connect with us:

Let Bharat Tax Services handle your ITR filing, ensuring a smooth, accurate, and beneficial experience. Contact us today!

× Hi