Section 108 — Set off of losses under same head of income
Old Act equivalent: Section 70 of IT Act 1961 Sub-part: Chapter VII — Set Off, or Carry Forward and Set Off of Losses
Statutory Text
(1) Unless provided otherwise in this Act, for any tax year, if net result of computation from any source under any head of income (other than “Capital gains”) is a loss, then assessee shall be entitled to set off such loss against his income from any other source under the same head for that tax year.
(2) Where the net result of computation of income made for any tax year under sections 72 to 90 in respect of—
(a) any short-term capital asset is a loss, such loss shall be set off against the income, computed in respect of any other capital asset for that year;
(b) any long-term capital asset is a loss, such loss shall be set off against the income computed in respect of any other long-term capital asset for that year.
Sub-sections
Sub-section (1)
Intra-head set off: loss from one source under a head (other than Capital Gains) can be set off against income from another source under the same head.
Sub-section (2)
Capital gains intra-head set off:
- (a) Short-term capital loss → set off against any capital gain (short-term or long-term)
- (b) Long-term capital loss → set off only against long-term capital gains
Key Structure
- Applies to: All assessees with losses from any source
- General rule (sub-section 1): Loss from one source → set off against income from any other source under the SAME head (except capital gains — which have special rules)
- Capital gains (sub-section 2):
- STCL can be set off against both STCG and LTCG
- LTCL can be set off only against LTCG
- Restrictions: Subject to other provisions of the Act (e.g., speculation loss cannot be set off against non-speculation business income)
Cross-References
- s109-setoff-other-head — Section 109: inter-head set off (loss under one head against income under another head)
- s110-carry-forward-house-property — Section 110: carry forward of unabsorbed house property loss
- s111-carry-forward-capital-gains — Section 111: carry forward of unabsorbed capital gains loss
- s112-carry-forward-business-loss — Section 112: carry forward of unabsorbed business loss
- Sections 72–90 (capital gains computation sections) — referenced in sub-section (2)
Amendment Notes
None noted from the extracted pages.
Practical Notes
- The STCL/LTCL asymmetry is important: short-term losses are more flexible (can offset both STCG and LTCG), while long-term losses can only offset LTCG.
- Speculation business losses cannot be set off against non-speculation business income (section 113 restriction) — even though both fall under the same head “PGBP”.
- This section operates before section 109 (inter-head set off): first exhaust intra-head set off, then move to inter-head.