Set off and carry forward of losses from speculation business
[Section-113 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 113(1) of Income Tax Act 2025
113(1) Any loss computed from a speculation business carried on by the assessee, during any tax year, shall be set off only against profits and gains, if any, of another speculation business for the said tax year.
Section 113(2) of Income Tax Act 2025
113(2) The unabsorbed speculation business loss for any tax year shall be carried forward to the subsequent tax year and shall be set off only against the profits and gains of speculation business, if any, computed for such subsequent tax year, and so on.
Section 113(3) of Income Tax Act 2025
113(3) The unabsorbed speculation business loss referred to in sub-section (2) shall not be carried forward for more than four tax years immediately succeeding the tax year in which such loss was first computed.
Section 113(4) of Income Tax Act 2025
113(4) The unabsorbed speculation business loss referred to in sub-section (2) shall first be allowed to be set off before allowing set off of any carried forward allowance under section 33(11) or 45(7).
Section 113(5) of Income Tax Act 2025
113(5) In this section,––
- (a) where any part of the business of the assessee (being a company) consist of purchase and sale of shares of other companies, then the assessee shall be deemed to be carrying on a speculation business, to the extent to which its business consists of purchase and sale of such shares;
- (b) “unabsorbed speculation business loss” means any loss computed in respect of a speculation business carried on by the assessee during the tax year, which has not been, or is not wholly, set off against profits and gains, if any, of another speculation business under sub-section (1) for the said tax year.
Section 113(6) of Income Tax Act 2025
113(6) The provisions of sub-section (5)(a) shall not apply to an assessee, being a company, if—
- (a) its gross total income consists mainly of income which is chargeable under the heads “Income from house property”, “Capital gains” or “Income from other sources”; or
- (b) its principal business is of trading in shares or banking or the granting of loans and advances.
FAQs on Section 113 of Income Tax Act 2025
1. What is a speculation business as per Section 113 of the Income Tax Act, 2025?
A speculation business typically involves transactions where delivery is not intended or effected. Additionally, for a company, purchase and sale of shares is deemed to be speculation business to the extent such transactions are not covered under specific exclusions.
2. Can speculation business loss be set off against any other business income?
No, speculation business loss can only be set off against profits from another speculation business during the same tax year.
3. Is there any time limit for carrying forward speculation business losses?
Yes, such losses can be carried forward for a maximum of four tax years immediately following the tax year in which the loss was first computed.
4. Against which income can unabsorbed speculation losses be set off in subsequent years?
Only against profits and gains of speculation business in subsequent tax years.
5. What is the order of set-off for speculation business losses?
Unabsorbed speculation business losses must be set off before allowing any carried forward allowance under Section 33(11) or 45(7).
6. What happens if speculation business loss is not set off within four tax years?
It lapses and cannot be carried forward any further.
7. Is speculation loss computed separately from regular business loss?
Yes, it is computed and maintained separately and has different set-off and carry forward rules.
8. Can a company carrying on share trading be treated as engaged in speculation business?
Yes, if the business involves purchase and sale of shares of other companies, it is deemed to be speculation business to that extent, unless exceptions under Section 113(6) apply.
9. What are the exceptions to deeming share trading as speculation business for companies?
The deeming provision does not apply if the company’s gross total income consists mainly of income under “Income from house property,” “Capital gains,” or “Income from other sources,” or if its principal business is trading in shares, banking, or granting loans and advances.
10. What is meant by “unabsorbed speculation business loss”?
It refers to the portion of speculation business loss that was not wholly set off in the same tax year and is therefore carried forward.
11. Is there any requirement to file a return to carry forward speculation business losses?
Yes, the loss must be declared in the return of income filed within the time prescribed under the Act.
12. Can losses from speculative transactions in commodities also be treated as speculation business loss?
Yes, if they fall within the definition of speculation business under the Act.
13. Can unabsorbed speculation losses be adjusted against speculative income earned from different businesses?
Yes, provided both fall within the scope of “speculation business” as defined under Section 113.
14. Are there any differences in treatment of speculation loss for individuals and companies?
The basic rules are the same, but the deeming provisions related to share trading apply only to companies.
15. Can speculation loss be carried forward indefinitely?
No, it is restricted to four tax years following the year of loss.
16. If a company qualifies for exclusion under Section 113(6), does it still report speculation loss on share trading?
No, if exclusions apply, the share trading business is not treated as speculation business for the purpose of this section.
17. Are intraday share transactions covered under speculation business?
Yes, generally intraday trades where no delivery is taken or given are considered speculative.
18. If speculative income is insufficient in future years, can speculation loss be adjusted against other heads of income?
No, it can only be adjusted against income from speculation business.
19. Can speculation losses be inter-source adjusted within the same head?
Yes, they can be adjusted against any other speculation income source in the same year.
20. Is there any provision for revising loss carried forward if income gets reassessed?
Yes, subject to the reassessment order and time limits, the loss carried forward may be revised accordingly.
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