Set-Off & Carry Forward of Losses —
8 Years, and the Due-Date Trap
How losses are set off in the same year, how long each type can be carried forward, why capital and business losses need a timely ITR, and the one loss that never expires.
A loss is first set off against income in the same year, and any unabsorbed balance is carried forward to future years. Business and capital losses carry forward for 8 years, speculative losses for 4 years, and unabsorbed depreciation for unlimited years against any head. To carry forward business, capital, speculative or F&O losses, you must file the ITR on or before the due date — the only exception is unabsorbed depreciation, which survives a late (belated) return.
From AY 2026-27, the Income-tax Act, 2025 replaces the Income-tax Act, 1961. The set-off and carry-forward provisions (old Sections 70–80) are renumbered, but the rules, heads and carry-forward periods are unchanged. Budget 2025 did not alter loss set-off. Confirm your exact section on the portal at incometax.gov.in.
How Set-Off Works: Intra-Head, Then Inter-Head
Losses are absorbed in a fixed order before anything is carried forward. Each step has its own restrictions.
- Step 1 — Intra-head: a loss is first adjusted within the same head — e.g. one house-property loss against another, or STCL against STCG from a different share sale.
- Step 2 — Inter-head: the remaining loss is set off against other heads, with limits — house-property loss is capped at Rs 2,00,000 a year against other income; business loss can be set off against any head except salary; capital losses stay within capital gains only.
- Step 3 — Carry forward: anything still unabsorbed is carried forward under the type-specific periods below.
File after the due date and you lose the right to carry forward capital losses, business losses, speculative losses and F&O losses incurred that year. Only unabsorbed depreciation survives. Brought-forward losses from earlier years can still be set off, but current-year losses are forfeited — so time your filing.
Loss Set-Off & Carry Forward — Reference Table
Every loss type, what it can be set off against, how long it carries forward, and whether a timely return is required.
| Loss Type | Set Off (Same Year) | Carry Forward | Future Set-Off | ITR by Due Date? |
|---|---|---|---|---|
| Short-Term Capital Loss | STCG & LTCG (any asset) | 8 years | STCG & LTCG only | Mandatory |
| Long-Term Capital Loss | LTCG only | 8 years | LTCG only | Mandatory |
| Business Loss (non-speculative) | Any head except salary | 8 years | Business income only | Mandatory |
| F&O Loss (non-speculative) | Any head except salary | 8 years | Business income only | Mandatory |
| Speculative Loss (intraday) | Speculative profit only | 4 years | Speculative profit only | Mandatory |
| House Property Loss | Other heads, max Rs 2L/yr | 8 years | House property income only | Mandatory |
| Unabsorbed Depreciation | Any head | Unlimited | Any head | Not needed |
| Specified Business (35AD) | Specified-business income only | Unlimited | Specified-business income only | Mandatory |
Section references are those of the Income-tax Act, 2025 (formerly ss.70–80, Act of 1961). Rules are unchanged from prior years.
Capital Losses — Set-Off Quick Reference
Capital losses are the most-asked case. STCL is flexible; LTCL is restricted. Neither can touch salary or other non-capital income.
| Capital Loss | vs STCG | vs LTCG | vs Salary | Carry Forward |
|---|---|---|---|---|
| Short-Term Capital Loss (STCL) | Yes | Yes | No | 8 years |
| Long-Term Capital Loss (LTCL) | No | Yes | No | 8 years |
LTCG on listed equity is taxed at 12.5% over Rs 1.25L u/s 112A; listed-equity STCG at 20% u/s 111A. LTCL from equity can be set off against LTCG from any asset.
Booked a capital loss this year? Get it correctly reported and carried forward.
Get ITR Filing Help →F&O, Intraday & House-Property Losses
Two share-market activities are treated very differently. F&O (futures & options) is a non-speculative business — its loss can be set off in the same year against any head except salary and carried forward 8 years (future set-off only against business income). Intraday equity trading is speculative — its loss can be set off only against speculative profit and carried forward just 4 years.
F&O — non-speculative business
- Same-year set-off vs any head except salary
- Carry forward 8 years
- Future set-off: business income only
- ITR-3; tax audit u/s 44AB may apply on turnover
Intraday equity — speculative
- Set-off only against speculative profit
- Carry forward just 4 years
- Cannot touch salary, capital gains or other income
- Reported as speculative business income
For house property, after the 30% standard deduction u/s 24(a) and home-loan interest u/s 24(b), a net loss can be set off against other income only up to Rs 2,00,000 a year; the balance carries forward 8 years against future house-property income. Home-loan interest itself is capped at Rs 2 lakh for a self-occupied house under the old regime, and most such deductions do not apply in the default new regime.
STCL carried forward
House-property loss
Depreciation u/s 32 that a business cannot absorb becomes unabsorbed depreciation — the only loss that (1) can be set off against any head, (2) carries forward for unlimited years, and (3) survives a belated return. It is the most durable relief for capital-intensive businesses.
You can carry a loss forward if
- You filed the ITR on or before the due date
- The loss is a genuine, computed loss under the right head
- You reported it in Schedule CFL / CG of the return
You cannot (or it lapses) if
- You filed a belated return (except unabsorbed depreciation)
- The 8-year (or 4-year) window has expired
- You try to set a capital loss against salary or business income
How to Carry Forward Losses in Your ITR
- Broker capital-gains / P&L statement
- Trade-wise STCG / LTCG working
- F&O turnover & audit check (44AB)
- House-property interest certificate
- Depreciation / block-of-assets schedule
- Brought-forward losses from prior ITRs
- Schedule CFL entries for current-year losses
- Schedule BFLA for brought-forward set-off
- Correct ITR form (ITR-2 / ITR-3)
- Return filed on or before the due date
Capital losses go in Schedule CG, current-year losses in Schedule CFL, and brought-forward set-offs in Schedule BFLA. The portal auto-computes eligible set-off and the balance to carry forward once entries are correct. See our ITR-2 and ITR-3 guides for the exact schedules.
Want your losses computed, set off and carried forward correctly?
Get ITR Filing Help →Set-Off & Carry Forward of Losses — FAQs
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