Specified Business Loss explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Clause 32(d) reports specified business loss under section 73A — the loss of a business referred to in section 35AD. It is set off only against profits of any other specified business, and carried forward indefinitely.
From the ICAI Guidance Note on Tax Audit (Revised 2026), the concluding edition under the Income-tax Act, 1961. For tax years under the Income-tax Act, 2025 the corresponding provision must be identified afresh, and the particulars move to Form No. 26 under rule 47 of the Income-tax Rules, 2026.
The rule
Paragraph 63.1: section 73A provides that any loss computed in respect of any specified business referred to in section 35AD shall not be set off except against profits and gains, if any, of any other specified business.
And the point that distinguishes it from the ordinary ring fence: it is not necessary that the nature of the specified business in which the loss is set off should be the same as that of the specified business in which the loss was incurred. A cold chain facility's loss can be set off against a warehousing facility's profit.
Paragraph 63.2 sets out sub-section (2): where the loss is not wholly set off under sub-section (1), or the assessee has no income from any other specified business, the unabsorbed amount is carried forward to the following assessment year, and:
- it shall be set off against the profits and gains, if any, of any specified business carried on by him assessable for that assessment year; and
- if it cannot be wholly so set off, the amount not set off shall be carried forward to the following assessment year, and so on; and
- any unabsorbed loss from a specified business under section 35AD can be carried forward for an indefinite period and set off only against profits of any other specified business.
A specified business loss has no expiry, unlike an ordinary business loss (8 years) or a speculation loss (4 years). But the price is that it can only ever be absorbed by another specified business. An assessee who exits the specified business entirely carries the loss forward for ever with nothing to set it against. Aged tranches of specified business loss therefore have to be tracked, even though none of them will lapse.
The clause 32 carry-forward table entry
The clause 32 table at paragraph 60.5 records the section 73A row as follows:
| Nature of loss | Income against which it can be set off | Maximum period |
|---|---|---|
| Loss from specified business under section 35AD, in the case of an assessee exercising the option of shifting out of the default tax regime under section 115BAC(1A) | Profit from any specified business, irrespective of whether such business is eligible for deduction under section 35AD | Indefinite |
Two things follow. The set-off target is any specified business, and expressly need not itself be eligible for the section 35AD deduction — so a specified business that never claimed the deduction can still absorb a specified business loss. And the row is framed for an assessee who has opted out of the default regime under section 115BAC(1A), which matters because section 35AD is among the deductions the concessional regimes deny.
What the auditor does about a specified business loss
Paragraph 63.3: under clause 32(d), the tax auditor has to verify from the books of account and other relevant documents whether the assessee is carrying on a specified business as referred to under section 35AD. If he is of the opinion that the assessee is carrying on such a business, he has to furnish the details of the loss incurred, if any, in respect of any specified business during the previous year.
And the granularity requirement: where the assessee carries on more than one specified business, and losses have been incurred in more than one such business, the details of the loss incurred in respect of each business are to be specified separately.
The working paper
Paragraph 63.4 recommends, in the format provided in the e-filing utility:
| Column | Content |
|---|---|
| (b) | Nature of specified business |
| (c) | Amount of loss incurred, if any, during the previous year with regard to that specified business |
| (d) | Loss from specified business brought forward from the earlier year |
| (e) | Amount of loss being set off against other specified business |
| (f) | Year of loss |
| (g) | Amount of loss being carried forward to the next assessment year |
| (h) | Whether loss set off against any other income other than from specified business under section 35AD |
Column (h) is a control: the answer should always be no, and a "yes" identifies a set-off the ring fence does not permit.
How this connects to the rest of the report
- Clause 19 — the section 35AD deduction itself, at 100% of capital expenditure incurred wholly and exclusively for the specified business.
- Clause 18 — assets whose cost was allowed under section 35AD must be excluded from the depreciation block, per paragraph 30.23.
- Clause 16(a) — section 28(vii) makes sums received on demolition, destruction, discarding or transfer of such an asset business income.
- Clause 8a — a concessional regime denies the section 35AD deduction, and the clause 32 table's section 73A row is framed for an assessee outside the default regime.
- Clause 32(a) — section 80 read with section 139(3) covers section 73A(2), so a specified business loss not determined in pursuance of a timely return cannot be carried forward at all, indefinite period or not.
Worked example
An assessee operates a cold chain facility and a warehousing facility for agricultural produce, both specified businesses, and a general trading business.
| Business | Result | Treatment |
|---|---|---|
| Cold chain facility (specified, section 35AD claimed) | Loss Rs 90,00,000 | Set off against the warehousing profit |
| Warehousing facility (specified, no section 35AD deduction claimed) | Profit Rs 35,00,000 | Available for set-off — eligibility for the deduction is irrelevant |
| Trading business | Profit Rs 2,00,00,000 | Not available — the ring fence blocks it |
| Balance specified business loss | Rs 55,00,000 | Carried forward indefinitely, reported per business at clause 32(d) |
| Return filed after the section 139(1) due date | — | No carry forward at all — section 80 |
Audit checklist
- Establish from the books whether any business is a specified business under section 35AD.
- Report the loss of each specified business separately.
- Set off only against another specified business, whether or not that business claimed the deduction.
- Track aged tranches even though the carry forward is indefinite.
- Confirm column (h) is answered no — no set-off against other income.
- Test the section 80 timely return condition.
- Cross-check clause 19, clause 18 and clause 8a for consistency.
Common mistakes
- Setting off a specified business loss against ordinary business profits, which the ring fence forbids.
- Refusing a set-off against a specified business that did not claim section 35AD.
- Reporting one combined figure for several specified businesses.
- Assuming indefinite carry forward survives a late return.
- Leaving the section 35AD assets in the depreciation block at clause 18.