A tax loss can reduce future tax, but only if the rules are followed.

Order of Adjustment

  • Losses are adjusted first within the same head (intra-head set-off), then across heads subject to restrictions (inter-head set-off), with only the balance carried forward.
  • Business loss cannot be set off against salary. Capital losses cannot be set off against any other head. House property loss can be set off against other heads up to Rs 2 lakh only under the old tax regime.

Carry Forward Period

  • Non-speculative business loss: 8 years.
  • Speculative business loss: 4 years.
  • Short-term and long-term capital losses: 8 years.
  • House property loss: 8 years.

Filing Deadline

Except for house property loss, losses can be carried forward only if the ITR is filed on or before the due date, 31 July 2026 for most non-audit taxpayers. A belated return forfeits this benefit.

New Tax Regime

House property loss cannot be set off against other heads of income. The Rs 2 lakh inter-head set-off is available only under the old regime.

Transition Under the Income-tax Act, 2025

Brought-forward losses remain protected under Section 536(2). However, the original carry-forward period continues from the year the loss was first incurred. Losses disallowed due to belated filing under the old law cannot be revived.

Key Takeaway

Report eligible losses correctly in Schedule CFL of your ITR to preserve future tax benefits.