Set off of losses under any other head of income
[Section-109 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 109(1) of Income Tax Act 2025
109(1) Subject to the provisions of this Chapter, for any tax year, if income computed under any head of income (other than “Capital gains”) is a loss, such loss shall be set off against income of the assessee under any other head, including “Capital gains”, if any, assessable for that tax year, subject to the following conditions:––
- (a) loss under the head “Profits and gains of business or profession” shall not be set off against income chargeable under the head “Salaries”; and
- (b) loss under the head “Income from house property” shall be set off to the extent of two lakh rupees against income under any other head;
Section 109(1) of Income Tax Act 2025
109(2) For any tax year, the loss under the head “Capital gains” shall not be set off against income under any other head.
FAQs on Section 109 of Income Tax Act 2025
What does Section 109(1) of the Income Tax Act, 2025 provide for?
It provides that if there is a loss under any head of income (except “Capital gains”) in a tax year, it can be set off against income under any other head, including “Capital gains”, subject to certain conditions.
Can a loss under the head “Capital gains” be set off against other heads of income?
No, as per Section 109(2), loss under the head “Capital gains” cannot be set off against income under any other head.
Is there any restriction on setting off business or profession loss?
Yes, loss under the head “Profits and gains of business or profession” cannot be set off against income under the head “Salaries”.
What is the maximum amount of loss from house property that can be set off against other heads?
Loss under the head “Income from house property” can be set off up to a maximum of ₹2,00,000 against income under any other head.
Can loss from house property be set off against capital gains?
Yes, but only up to ₹2,00,000.
Can loss from business or profession be set off against capital gains?
Yes, it can be set off against capital gains, unless the gain is under “Salaries”.
Can capital gains loss be set off against salary income?
No, loss under “Capital gains” cannot be set off against any other head, including “Salaries”.
Is there any restriction on setting off loss under other heads like “Income from other sources”?
There is no specific restriction mentioned for “Income from other sources”; such loss can generally be set off against other heads except as restricted by other provisions.
Does Section 109 allow inter-head set-off of all types of income?
No, it allows inter-head set-off except where specific restrictions apply, such as in the case of capital gains losses, business losses against salaries, and house property loss above ₹2,00,000.
Is the ₹2,00,000 limit on house property loss set-off applicable per property or per assessee?
The limit is per assessee for the tax year, not per property.
If an assessee has salary income and house property loss of ₹3,00,000, how much can be set off?
Only ₹2,00,000 of the house property loss can be set off against salary income; the remaining ₹1,00,000 cannot be set off.
Can any remaining unabsorbed loss be carried forward if it is not fully set off?
This FAQ pertains only to set-off; provisions for carry forward would be covered under separate sections of the Act.
What happens if an assessee has both salary income and capital gains, and a business loss?
The business loss can be set off against capital gains, but not against salary income.
Can capital gains income absorb losses from other heads?
Yes, capital gains income can absorb losses from other heads (except capital gains itself), subject to conditions in Section 109(1).
Is there any priority order for setting off losses under this section?
Section 109 does not specify a priority order; however, the set-off must comply with the specific restrictions listed.
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