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Income-tax Act, 1961 · Chapter VI: Aggregation of Income and Set Off or Carry Forward of Loss · Set off, or carry forward and set off

Section 72: Carry forward and set off of business losses

The Income-tax Act, 1961 was repealed by the Income-tax Act, 2025 from 1 April 2026. The text is kept here because the judgments below apply it.

In plain words

A business loss that cannot be set off against other income in the same year may be carried forward and set off against business profits of later years.

  • Speculation losses are dealt with separately and are not covered here.
  • The carried forward loss can be set off only against business or professional income, not against other heads.
  • Effect is given to this section before unabsorbed depreciation and certain other allowances are carried forward.
  • There is a limit on the number of years a loss can be carried forward.

A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.

Official text

[(1) Where for any assessment year, the net result of the computation under the head —Profits and gains of business or profession‖ is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or, *** where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and—

(i) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year; * * * * *

(ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on:] [Provided that where the whole or any part of such loss is sustained in any such business as is referred to in section 33B which is discontinued in the circumstances specified in that section, and, thereafter, at any time before the expiry of the period of three years referred to in that section, such business is re-established, reconstructed or revived by the assessee, so much of the loss as is attributable to such business shall be carried forward to the assessment year relevant to the previous year in which the business is so re-established, reconstructed or revived, and—

(a) it shall be set off against the profits and gains, if any, of that business or any other business carried on by him and assessable for that assessment year; and

(b) if the loss cannot be wholly so set off, the amount of loss not so set off shall, in case the business so re-established, reconstructed or revived continues to be carried on by the assessee, be carried forward to the following assessment year and so on for seven assessment years immediately succeeding.]

(2) Where any allowance or part thereof is, under sub-section (2) of section 32 or sub-section (4) of section 35, to be carried forward, effect shall first be given to the provisions of this section.

(3) No loss [(other than the loss referred to in the proviso to sub-section (1) of this section)] shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed.

Source: India Code (Legislative Department), the text of the Act as it stood before its repeal. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.

Supreme Court judgments citing the section 72