In Income Tax Act ,There are basically five heads under which income is calculated (given under)
- Income from house property
- Business & profession
- Capital gain
- Other sources
,and then Total of Income under these heads are taxable as person total income after some deductions.But totaling of this head is not just simple total of all five heads .In fact there are some rules ,which are guiding us how to calculate total Income from these heads .These Rules are explains us whether a loss from one sources can be set off against other source or in which cases we can adjust Inter head adjustment.so first take Intra head or with in the head adjustment.
Set off of loss under the same head of income.(section 70)
This means if a person has ,two or more sources of income under same head then whether he can adjust the profit loss of all that sources ,with each other or not.
As per section 70 of the income tax act Loss from one source can be adjusted with the other source of income,within same head except some exception where intra source adjustment can not be done.
Exception to above rule are
- Loss from speculation business: Loss from speculation business can be adjusted against speculation profit only.
- Long term Capital loss:Loss from Long term capital loss Can be set off against long term capital gain only.
- Long term Loss From shares where STT paid: Loss from Long term loss from sale of shares where STT paid can be adjusted against Profit from Long term profit from sale of shares where stt Paid.
- Loss from any other source can not be adjusted against winnings from lotteries,crossword ,puzzles ,card games,or any other game of gambling or betting.
- Loss from the activities of owning and maintaining race house: can be adjusted against against profit from such business only.
so except rule given above we can adjust loss from one source against income from other source in the same head.
- Loss from one house can be adjusted against income of other house under House property head.
- Loss from non speculation business from one business can be adjusted against profit from other speculation or non speculation business.
- Short term capital Loss can be adjusted against other capital gain whether Long term capital gain or short term capital gain.
- Adjustment in Income From other source can be made Intra head except rules explained above.
Now talk about Inter Head adjustments means Loss of one head with other head.
Set off Loss from one head against Income from another Head.
If the net result of computation made for any year in respect of any head of income is loss,the same can be set off against the income from other head except in following cases.
- Loss From speculation business : same as above ,as it is not allowed to be adjusted in same head ,it is also not allowed to be adjusted against any other head .
- Loss from capital gain: Can not be adjusted against any other head.
- Loss from business and profession can not be adjusted against salary.
- Loss from maint. & owing of Race horses ,lotteries,cross word puzzles,betting gambling other game can not be adjusted against any other head.
- Loss from Sources ,where income is exempted under section 10 can not be adjusted against any other Head Like income from Log term capital Loss from shares (STT paid)