Section 110 of the Income-tax Act, 2025 carries forward a house property loss that could not be set off under section 109. In later years it can be set off only against income from house property, for a maximum of eight tax years.
What section 110 does
Section 110 is where the house property loss above the ₹2,00,000 inter-head cap goes — the successor to section 71B of the Income-tax Act, 1961.
The trade-off is clear. In the year of the loss, section 109(1)(b) lets ₹2,00,000 shelter any other income. From the next year onwards, the carried-forward balance is ring-fenced: it can be set off only against income from house property.
The outer limit is eight tax years immediately succeeding the year in which the loss was first computed. A loss unused after that lapses.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 71B | Carry forward and set off of house property loss | 110(1) |
| 71B | Eight-year limit | 110(2) |
| 71(3A) | ₹2,00,000 inter-head cap in the year of the loss | 109(1)(b) |
| 80 | Loss must be returned in time | 121 |
| 24(b) | Interest deduction that creates the loss | 22(1)(b) |
Section 110 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — what is carried forward and how it is used
Where a loss under the head Income from house property cannot be wholly set off against income under any other head as per section 109, the unabsorbed amount is carried forward to the following tax year and (a) set off only against income from house property assessable for that year; and (b) if it still cannot be wholly set off, carried forward again, and so on.
Sub-section (2) — the eight-year limit
No loss shall be carried forward under this section for more than eight tax years immediately succeeding the tax year for which the loss was first computed. The clock runs from the year the loss arose, not from the year it was first carried forward.
Why the loss arises in the first place
For a self-occupied property with annual value nil under section 21(6), the interest deduction under section 22 — capped at ₹2,00,000 by section 22(2) — creates a loss almost by definition. For a let-out property, the loss arises where interest exceeds annual value less the 30% deduction, and here there is no interest cap at all, so the loss can be large.
The interaction to watch
Two separate ₹2,00,000 limits can apply to the same taxpayer in the same year and they are often confused. Section 22(2) caps the interest deduction on a self-occupied property. Section 109(1)(b) caps the inter-head set off of the resulting loss. Section 110 then carries forward whatever survives both.
Worked example
An individual owns one self-occupied flat and one let-out flat in tax year 2026-27.
| Computation | Working | Amount |
|---|---|---|
| Let-out property: annual value after municipal taxes | — | ₹4,20,000 |
| Less: 30% under section 22(1)(a) | — | (₹1,26,000) |
| Less: interest — no cap for a let-out property | — | (₹7,40,000) |
| Loss from the let-out property | (₹4,46,000) | |
| Self-occupied property: interest capped by section 22(2) | Annual value nil | (₹2,00,000) |
| Net loss under the head | After section 108 intra-head netting | (₹6,46,000) |
| Set off against salary under section 109(1)(b) | Capped | ₹2,00,000 |
| Carried forward under section 110 | ₹4,46,000 |
The ₹4,46,000 can be used up to tax year 2034-35 — eight years after 2026-27 — and only against income from house property. If the taxpayer's properties stay loss-making, that carried-forward amount may never be used.
None of it survives at all unless the return for 2026-27 is filed by the section 263(1) due date, because of section 121.
Compliance checklist and due dates
- File the loss return by the section 263(1) due date — section 121 denies the carry forward otherwise.
- Track the eight-year expiry from the year the loss was first computed.
- Remember the carried-forward loss can meet only house property income, unlike the ₹2,00,000 allowed in the year of the loss.
- Keep separate records for each year's carried-forward balance so the oldest is used first and the expiry is visible.
- For a let-out property there is no interest cap under section 22, so large losses are possible.
- Check section 202 — under the new regime the interest deduction and set off position needs to be tested before planning.
Common mistakes
- Expecting the carried-forward loss to shelter salary in a later year. It cannot.
- Losing the carry forward by filing the return late.
- Counting the eight years from the first year of carry forward instead of from the year the loss arose.
- Confusing the section 22(2) interest cap with the section 109(1)(b) set off cap.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.