Carry forward and set off business losses

When the net result of the computation under the heading "Profits and gains of business or profession" is a loss to the taxpayer for any assessment year, other than a loss incurred in speculation business, and such loss cannot be or is not entirely set off against revenue under any head of revenue in accordance with the provisions of section 71. Subject to the other requirements of this Chapter, the remaining portion of the loss that has not been so set off or, in the event that he has no income under any other item, the entire loss shall be carried over to the subsequent assessment year, and:-

(a) it will be deducted from any income and gains from any business or profession he is engaged in that are taxable in that assessment year, if any. As long as he continued to operate the company or profession in which the loss was initially calculated in the prior year pertinent to that assessment year;

(b) if the loss cannot be fully offset in this manner, the amount of the loss that cannot be fully offset will be carried over to the subsequent assessment year, and so on.

More stuff at 80g income tax.

Accordingly, if the assessee re-establishes, reconstructs, or revives the business at any point before the lapse of the three-year period mentioned in section 33B, and the assessee sustains all or a portion of the loss in any business mentioned in that section and that business is discontinued under the contexts specified in that section.

The portion of the loss that can be attributed to such a business will be carried over to the assessment year that corresponds to the year it was created, rebuilt, or resurrected in this manner, and:-

(a) it will be offset by any income and gains from that business or any other one he runs that are taxable for that assessment year if any; and

(b) if the loss cannot be fully offset in this manner, the amount of the loss not so offset must, in the event that the assessee's business is subsequently re-established, rebuilt, or resurrected, be carried over to the subsequent assessment year, and so forth for the following seven assessment years.

The effect must first be given to the requirements of this section before any allowance or portion thereof may be carried forward under subsection (2) of section 32 or subsection (4) of section 35. In accordance with this rule, no loss may be carried forward for more than eight assessment years following the assessment year in which the loss was initially computed.

Article on deduction under section 80g.