Set off and carry forward of losses from specified business
[Section-114 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 114(1) of Income Tax Act 2025
114(1) Any loss computed from a specified business carried on by the assessee, during any tax year, shall be set off only against profits and gains, if any, of any other specified business for the said tax year.
Section 114(2) of Income Tax Act 2025
114(2) The unabsorbed loss from the specified business 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 any specified business, if any, computed for such subsequent tax year, and so on.
Section 114(3) of Income Tax Act 2025
114(3) In this section,––
- (a) “specified business” means any specified business referred to in section 46;
- (b) “unabsorbed loss from the specified business” means, any loss computed in respect of a specified 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 specified business under sub-section (1) for the said tax year.
FAQs on Section 114 of Income Tax Act 2025
What is a specified business for the purpose of section 114?
A specified business refers to any business specified under section 46 of the Income Tax Act, 2025.
Can losses from a specified business be set off against income from non-specified businesses?
No, losses from a specified business can only be set off against profits and gains of any other specified business.
Is inter-business set-off allowed among specified businesses?
Yes, losses from one specified business can be set off against profits from another specified business in the same tax year.
What happens if the loss from a specified business cannot be fully set off in the same tax year?
The unabsorbed loss can be carried forward to subsequent tax years.
Can the carried forward loss from a specified business be set off against profits of a non-specified business?
No, it can only be set off against profits from specified businesses in subsequent tax years.
Is there a time limit for carrying forward losses from specified businesses?
Section 114 does not prescribe any time limit; losses can be carried forward indefinitely until fully set off, subject to conditions.
What is meant by ‘unabsorbed loss from the specified business’?
It means the portion of the loss from a specified business that remains after setting off against profits of other specified businesses in the same tax year.
Can losses from a specified business be set off against income under other heads, such as salary or capital gains?
No, such set-off is restricted exclusively to profits of other specified businesses.
Is filing of return within due date required to carry forward specified business loss?
Section 114 does not impose such a requirement; however, compliance with other applicable provisions of the Act must be ensured.
Are speculative losses or capital losses treated as specified business losses under section 114?
No, only losses from specified businesses as defined under section 46 are covered under section 114.
Can an assessee set off current year profits of one specified business against brought forward losses of another specified business?
Yes, brought forward losses of a specified business can be set off against current year profits of another specified business.
Are there any conditions or approvals required to carry forward such losses?
Section 114 does not mention any special conditions or approvals for carrying forward losses from specified businesses.
What happens if the assessee discontinues the specified business?
Section 114 does not restrict carry forward solely due to discontinuation; the loss may still be set off against other ongoing specified businesses.
Is consolidation of losses from multiple specified businesses allowed?
Yes, losses from one specified business can be consolidated and set off against profits from other specified businesses, both in the same year and in subsequent years.
Can partnership firms and companies both claim set off under section 114?
Yes, section 114 applies to any assessee carrying on a specified business.
Does section 114 override the general provisions for set-off and carry forward of losses?
Yes, section 114 is a special provision that applies specifically to losses from specified businesses.