How to offset your losses

Loss from house property can be offset against income from any other head,including salary in the same FY. If there is no sufficient income against which such a loss can be offset,the remaining loss can be carried forward up to eight FYs. In subsequent FYs,such a loss can be offset only against income from house property.

Loss from capital gains

Losses under this are categorised as short term and long-term capital gains. Short-term capital loss can be offset against any capital gain — long term or short term. Long-term capital loss can be offset only against a long-term capital gain. Any capital loss after the offset can be carried forward up to eight FYs. A short-term loss which is carried forward can be set off against any capital gains. A long-term capital loss which is carried forward can be offset against only long-term capital gains. Both long-term and short-term capital losses can’t be offset against income from any other source.

Loss from business

Loss from business or profession cannot be offset against salary incomes. The loss can be carried forward up to eight FYs and can be offset only against the income from business/profession.

Loss from other sources

Loss under this (other than loss from owning and maintaining racehorses) can be offset against income from another source except the income from lotteries,crossword,gambling or other games. The loss under this (other than that from owing and maintaining racehorses) cannot be carried forward to the following FYs.

It is mandatory to file a loss ITR within the due date to be eligible to carry forward losses. The only exception to this is loss from house property which can be carried forward even if the ITR is not filed within the due date.

How to adjust losses:

1: Adjustment under the same head of income: If you have incurred a loss under a particular head of income,say business,you are allowed to offset it against other business income.

2: Inter head adjustment in the same FY: This is applicable only if it is not possible to offset a loss under 1. If you have incurred a loss from house property,you are allowed to offset it against other income heads like salary income or capital gains.

3:Carry forward losses up to the specified period: This step is applicable only if it is not possible to offset a loss under 1 and 2.

—* The writer is executive director,tax,KPMG