Adjustment And Carry Forward Of Losses

According to the Indian Income Tax law, the Income Tax is leviable on 'Total Income' of assessees. The Total income is arrived at by aggregating income under all the 'heads of income' during the year and allowing certain deductions that the assessee is eligible to claim in accordance with the Income Tax Act. Further, there are certain defined nature of income which are specifically 'exempt' from tax and thus they do not form part of the total income for the year.

In case an assessee has incurred loss in any year, it is only fair that such loss be allowed to be carried forward and set-off against the income of the subsequent year. The Income Tax Law does recognise this need to set off loss incurred in a particular year against the income of the subsequent year before arriving at the 'total income' on which tax becomes payable by the assessee. However, such loss is allowed to be carried forward and set off subject to satisfying of certain conditions and restrictions