Clubbing Provisions and Set off and/or Carry forward of Losses

(c)Ramesh, a resident individual, submits the following information for the financial year 2025-26 :

Determine the Gross Total Income of Ramesh for the assessment year 2026-27 and also calculate the amount of loss which can be carried forward for being set off in the next assessment year, assuming that he has shifted out of the default tax regime under section 115BAC of the Income Tax Act, 1961.

(b)Who all are required to mandatorily file the Return of Loss as per Section 80 of Income Tax Act, 1961 ?

( b )Mr. Ramesh furnishes the following details for year ended 31.03.2025 :

Following are the information relating to Carry Forward of Losses :

Brought Forward Loss from Business of Textile ₹ 1,20,000- this being the 8th year from the year of Loss.

Compute Gross Total Income of Mr. Ramesh for the assessment year 2025-26, if he has exercised the option of shifting out of default tax regime provided under Section 115BAC. Also state the eligible Carry Forward losses for future years.

(c)Which are all persons required to mandatorily file the Return of Loss as per Section 80 of Income Tax Act, 1961. Also explain the consequences of Non-filing of Return of Loss in time.

Loss arising on account of illegal business :

(A)Cannot be set off

(B)Can be set off against the profits of legal business

(C)Will be treated under as unexplained expenditure

(D)None of the above

Section 80 requires mandatory filing of Return of loss under section 139(3) on or before the due date for carry forward of following losses except :

(A)Profit and gains from business and profession

(B)Loss from maintenance of race horses

(C)Loss from Income from House Property

(D)Loss under the head Capital Gains

During the A.Y. 2023-24, Mr. K has a loss of ₹ 6 lakhs under the head ‘‘Income from house property’’, loss of ₹ 5 lakhs from business of profession and income of ₹ 3 lakhs from long term capital gains. He filed his return of income for the A.Y. 2023-24 on 31.12.2023. Determine the total income of Mr. K for A.Y. 2023-24 and the amount of loss which can be carried forward in a manner most beneficial to him ?

(A)Total income Nil; loss of ₹ 4,00,000 from house property and loss of ₹ 4,00,000 from business or profession

(B)Total income ₹ 1,00,000; loss of ₹ 4,00,000 from house property

(C)Total income Nil; No loss is allowed to be carried forward

(D)Total income Nil; loss of ₹ 6,00,000 from house property

Loss from speculative business may be carry forward up to :

(A)8 years

(B)4 years

(C)7 years

(D)None of the above

Unabsorbed depreciation which could not be set off in the assessment year in which it arose, can be carried forward for :

(A)8 years

(B)Indefinite period

(C)4 years

(D)12 years

Brought forward loss from house property of ₹ 3,25,000 of A.Y. 2023-24 is allowed to be set off against income from house property of A.Y. 2024-25 of ₹ 5,00,000 to the extent of :

(A)₹ 2,00,000

(B)₹ 3,25,000

(C)₹ 2,50,000

(D)₹ 1,00,000

If X Ltd. amalgamates with Y Ltd. then the accumulated business losses and unabsorbed depreciation of X Ltd. :

(A)Cannot be carried forward by Y Ltd.

(B)Can be carried forward by Y Ltd.

(C)Cannot be carried forward by X Ltd.

(D)Can be carried forward by X Ltd.

The benefit of carry forward and set off of losses under section 79 of the Income Tax Act, 1961 by a closely held Indian Company which is a subsidiary of a foreign company as a result of amalgamation or demerger is subject to the condition that ................... per cen t age of s h are hold ers of t he amalgamating foreign company continue to be shareholders of the amalgamated foreign company.

(A)10%

(B)26%

(C)51%

(D)100%

A person has loss from House Property in the current year. It can be set off against Income from :

(A)Any other head of Income up to a maximum of 2,00,000

(B)Only from Income from House Property without any monetary limit

(C)Both (A) and (B)

(D)None of the above

(a)Nisha, a resident individual, provides following details of her income/losses for the year ended 31.03.2023 :

Compute gross total income of Nisha for the assessment year 2023-24 and the amount of loss that can be carried forward, assuming that she does not opt to pay taxes u/s 115BAC.

(a)Explain the term ‘‘return of loss’’ under the Income-tax Act, 1961. Can any loss be carried forward even if return of loss has not been filed as required under section 139(3) of Income-tax Act, 1961 ?

Govind, a resident individual has following incomes : Salary ₹ 5,60,000; Loss from house property (let out) ₹ 60,000; Loss from house property (self - occupied) ₹ 1,80,000; and long -term capital gain on sale of vacant land ₹ 8,00,000. How much is the total income of Govind for the assessment year 2023 -24?

(A)₹ 13, 60,000

(B)₹ 12, 10,000

(C)₹ 11, 60,000

(D)₹ 11, 20,000

CVR & Co. has speculation business l oss of ₹ 12, 40,000 for the assessment year 2023 - 24. For how many assessment years such loss from speculation business is eligible for carry forward?

(A)8 subsequent assessment years

(B)4 subsequent assessment years

(C)2 subsequent assessment years

(D)Not eligible for carry forward and set off

Brought forward loss from house property of ₹ 2,25,000 of A.Y. 2021-22 is allowed to be set-off against income from house property of A.Y. 2022-23 of ₹ 4,00,000 to the extent of :

(A)₹ 2,00,000

(B)₹ 2,25,000

(C)₹ 1,75,000

(D)₹ 4,00,000

Ganesh incurred short term capital loss of ₹ 80,000 on sale of shares during the previous year 2021-22 through the national stock exchange. Such loss can be:

(A)Set off against short term capital gain

(B)Set off against short term and long term capital gain

(C)Not be allowed to set off

(D)Set off against long term capital gains

If new tax regine is adopted, which of the following losses will not be carried forward in the hand of an individual :

(A)Loss from activity of owning and maintaining race horses

(B)Loss in speculation business

(C)Loss on transfer of capital assets

(D)Loss under the head House property

Section 79(b) of Income Tax Act, 1961 deals with :

(A)Carry forward and set off losses in case of change in constitution of firm

(B)Carry forward and set off losses in case of companies in which the public are not substantially interested

(C)Carry forward and set off losses in case of eligible start up

(D)Carry forward and set off losses in case of succession of business or profession

The details of income/loss of Keshav engaged upto 30.10.2020 in salaried employment and thereafter in different businesses computed under various heads of income for the previous year 2020-21 are given hereunder :

The gross total income of Keshav for A.Y. 2021-22 after set off of the losses would be :

(A)₹ 5,10,000

(B)₹ 2,30,000

(C)₹ 3,10,000

(D)₹ 7,60,000

Deduction in respect of profits and gains from certain newly undertaking other than Infrastructure Development Undertaking as per section 80-IB is allowed to an assessee whose gross total income includes profits & gains derived from which of the following business ?

(i)Cold chain facility for agriculture produce

(ii)Hotel

(iii)Hospital anywhere in India

(iv)Production of Mineral-oil

(A)(i) & (iv)

(B)(i), (ii) & (iv)

(C)(i), (iii) & (iv)

(D)(i), (ii), (iii) & (iv)

R & S are 2 partners of RS & Co. (a partnership firm). The firm was constituted on 01.04.2020 after the death of M (father of R & S) to continue the business of

M.M carried a proprietary business of Food Grains and the accumulated losses

up to 31.03.2020 were ₹ 50,000. Particulars of income and loss of RS & Co. for the P.Y. 2020-21 are :

(i)Income from Grain business ₹ 4,00,000.

(ii)Loss in Cloth Business Rs. 60,000

(iii)Speculative business income ₹ 2,00,000

Against the income of ₹ 6,00,000 for the year partners of the firm want to set-off the following :

(i)Loss in Cloth business of firm ₹ 60,000

(ii)Business Loss of ₹ 50,000 of M accumulated up to 31.03.2020

(iii)H.P. loss of R of ₹ 25,000

(iv)Speculative loss of S of ₹ 32,000

(v)Disputed sales tax liability of M of the financial year 2016-17 of ₹ 15,000 which was paid by the firm on 01.12.2020 but not deducted from any of the income given above. Determine and find out the income of RS & Co. which will be subject to tax for A.Y. 2021-22 :

(A)₹ 4,90,000

(B)₹ 5,25,000

(C)₹ 5,35,000

(D)₹ 4,75,000

Which of the following is not eligible for carry forward and set off ?

(A)Loss from activity of owning and maintaining race horses

(B)Loss under the head ‘other sources’

(C)Loss under the head ‘house property’

(D)Loss from transfer of short-term capital assets

Carried forward losses of normal business can be set off against any other income in subsequent assessment year except _________

(A)income from speculation business

(B)income under the head house property

(C)income under the head other sources

(D)income under the head salaries

Where the net result for any assessment year in respect of any source falling under any head of income is a loss; the assessee is entitled to set-off the amount of such loss against his income from any other source under the same head. However, certain losses are not being allowed to be set-off as per General Rule. Find out from the following which are those :

(i)Speculative business loss

(ii)Long term capital loss

(iii)Casual income

(iv)Loss from an exempt source

(A)(i) & (ii)

(B)(i), (ii) & (iv)

(C)(i), (ii), (iii) & (iv)

(D)(i), (iii) & (iv)

Zeet (P) Ltd. incurred loss of ₹ 1,10,000 for the assessment year 2019-20. It is planning not to file return of loss and claim the loss for carry forward. The monetary limit of the tax amount for applying prosecution provisions contained in section 276CC will apply when the tax liability exceeds :

(A)No monetary limit (NIL)

(B)₹ 3,000

(C)₹ 10,000

(D)₹ 25,000

MNO Ltd. was incorporated in April, 2018 and its aggregate turnover for the previous year 2018-19 must not exceed ................. in order to be eligible for deduction under section 80-IAC of the Act.

(A)₹ 2 crores

(B)₹ 5 crores

(C)₹ 10 crores

(D)₹ 25 crores

Annamalai has income from business of ₹ 5,50,000 and loss from horse race of ₹ 60,000 of the previous year 2018-19. He has brought forward discontinued business loss of ₹ 1,10,000 of the assessment year 2010-11 and regular business loss of ₹ 90,000 of assessment year 2017-18. His total income for the assessment year 2019-20 after set off of eligible losses would be :

(A)₹ 2,90,000

(B)₹ 3,50,000

(C)₹ 4,60,000

(D)₹ 4,10,000

Kamal has eligible brought forward business loss relating to assessment year 2016-17 of ₹ 70,000. For the previous year 2018-19 he has (i) loss from house property ₹ 3,10,000; (ii) loss from business ₹ 90,000; and (iii) loss under the head ‘other sources’ ₹ 1,00,000. He filed the return of income for the assessment year 2019-20 on 5-9-2019 which is beyond the ‘due date’ specified in section 139(1). State the losses which are eligible for carry forward for assessment year 2020- 21.

(A)All losses except loss under the head “other sources”

(B)Carried forward loss of ₹ 70,000 from AY 16-17

(C)Only loss from house property is eligible for carry forward

(D)All losses are eligible for carry forward including loss under the head “income from other sources”

Short term capital loss can be set-off as per provisions of section 72 of the Income Tax Act, 1961 from :

(A)Short term capital gain

(B)Short term capital gain and Long term capital gain

(C)Long term capital gain

(D)Short term capital gain and profit & gain from business

The loss from activity of owning and maintaining race horses is eligible for carry forward and set off for a maximum period of:

(A)8 Assessment years

(B)6 Assessment years

(C)4 Assessment years

(D)2 Assessment years

Business loss can be set off from income of any other business but cannot be set off from :

(A)Salary Income

(B)House Property Income

(C)Long Term Capital Gains

(D)Income from derivatives specified in section 43(5)

(iii)Shashi Bhushan has submitted details of the following income/loss as computed below, for the previous year 2018-19 :

You are required to compute the total income of the assessee for the assessment year 2019-20, showing clearly the manner of set-off and the items eligible for carry forward.

SJG Ltd., a manufacturer of leather goods in a factory located at Noida having an annual turnover of ₹ 50 crore. The company, during the year, employed 200 new regular workers in the factory, which was 20% of the existing work-force employed on the last day of the preceding year. It paid ₹ 30 lakh to the new workers during the year as additional wages. All workmen were employed from 1st May, 2017. The eligible amount of deduction which the company can claim under section 80 JJAA of Income-Tax Act, 1961 is :

(A)₹ 30 lakh

(B)₹ 15 lakh

(C)₹ 9 lakh

(D)₹ 18 lakh

Income Tax Act, 1961 distinguished a closely held company from widely held company significantly from the viewpoint of :

(A)tax levied at different rates

(B)section 2(22)(e) where certain payments made to shareholders are treated as deemed dividend

(C)allowed to carry forward its business losses only if the conditions specified in section 79 are satisfied

(D)Both (B) and (C)

The benefit of carry forward and set-off of losses under section 79 of Income Tax Act, 1961, by a closely held Indian company which is a subsidiary of a foreign company as a result of amalgamation or demerger, is subject to the condition that specified percentage of the shareholders of the amalgamating or demerged foreign company continue to be the shareholders of the amalgamated or the resulting foreign company which is :

(A)51%

(B)10%

(C)26%

(D)100%

(e)State the time limit for carry forward and set off of loss in the following cases :

(i)Loss from speculation business;

(ii)Loss under the head “Capital gains”;

(iii)Loss under the head ‘Income from other sources’.

(iii)Karan Bothra, a resident individual, provides the following details relating to the financial year 2025-26 :

(i)Short- term capital loss from sale of shares (STT paid) : ₹ 1,20,000

(ii)Long- term capital gain on sale of land : ₹ 2,50,000

(iii)His wife, Mrs. Sunita Bothra who is Company Secretary, received ₹ 90,000 (after deducting TDS @ 10%) as professional fees from a Private Limited Company where Mr. Karan Bothra is a director.

(iv)His minor daughter Kajal earned ₹ 1,50,000 (Gross) from a TV advertisement contract.

(v)His minor son Kunal earned ₹ 80,000 as bank interest from a fixed deposit.

Compute the Total Income of Mr. Karan Bothra for the assessment year 2026-27, if he has exercised the option of shifting out of default tax regime provided under section 115BAC. A ssuming that his wife’s income is lower than the income of Karan Bothra for the financial year 2025-26.

(b)Raghuveer has two minor children, viz., Master A and Master B. Master A is a child artist and Master B is suffering from diseases specified under section 80U of the Income Tax Act, 1961.

The Income of both the minor child A and B are as follows :

Income of A from stage shows : ₹ 1,00,000

Income of A from bank interest : ₹ 6,000

Income of B from dividend from domestic company : ₹ 30,000

Income of B from bank interest : ₹ 1,20,000

Explain in whose hands the above income of minor children be taxable under the Income Tax Act, 1961. (Assume that Income of Raghuveer is higher than his wife’s income).

Mr. P has two daughters and two sons all of which are minor. The Annual Income of two sons are ₹ 6,000 and ₹ 3,000 respectively. The annual income of two daughters are ₹ 8,000 and ₹ 6,000 respectively. The daughters whose income is ₹ 6,000 is from singing competition. How much amount of income will be clubbed in the hands of Mr. P. The assessee opt 115BAC (1A) of the Income Tax Act, 1961 :

(A)₹ 14,000

(B)₹ 20,000

(C)₹ 17,000

(D)₹ 12,500

Mr. A gifted a house property to his wife, Mrs. M and a flat to his daughter-in-law. Mrs. S. Both the properties were let out. Which of the following statements is correct ?

(A)Income from both properties is to be included in the hands of Mr. A by virtue of section 64

(B)Income from property gifted to wife alone is to be included in Mr. A’s hands by virtue of section 64

(C)Mr. A is the deemed owner of house property gifted to Mrs. M and Mrs. S.

(D)Mr. A is the deemed owner of property gifted to Mrs. M. Income from property gifted to Mrs. S would be included in his hands by virtue of section 64

Transfer of Income without transfer of assets would be taxable in the hands of :

(A)Transferor only

(B)Transferee only

(C)Both (A) and (B)

(D)None of the above

Income of a minor child from a Fixed Deposit with a bank, made out of income earned from scholarship, is to be :

(A)Assessed in the hands of the minor child

(B)Clubbed with the income of the parent whose total income before such clubbing is higher

(C)Exempted from tax

(D)Clubbed with father’s income

Income of a minor child from a Fixed deposit with a bank, made out of income earned from scholarship, is to be :

(A)Assessed in the hands of the minor child

(B)Clubbed with the income of the parent whose total income before such clubbing is higher

(C)Exempted from tax

(D)Clubbed with father’s income

Which of the following is the reason for inclusion of other person’s Income in assessee’s total Income ?

(A)To facilitate the Government to collect more taxes

(B)To prevent excess payment of tax

(C)To prevent diversion of Income from Higher slab individuals to low slab Income

(D)To keep a person away from tax liability

Clubbing of Income of a minor child is applicable to a :

(A)Minor Step Child

(B)Minor Married Daughter

(C)Minor Adopted Child

(D)All of the Above

( a )What are the provisions for clubbing of income of a minor child under section 64(1A) of Income Tax Act, 1961 ? Mention the cases where income of minor child is taxable in the hands of minor himself.

Mandeep, (whose total income excluding this income is greater) has three minor daughters, whose total income are ₹ 4,500, ₹ 1,000 and ₹ 3,500 respectively. Total income clubbed in the hands of Mandeep for financial year 2021-22 is :

(A)₹ 4,500

(B)₹ 5,000

(C)₹ 5,500

(D)₹ 9,000

Bhuvana transferred the rental income of ₹ 1,20,000 p.m. to Sneha during the previous year 2021-22 but she did not transfer the property in the name of Sneha. As per provision of the Income Tax Act, 1961, the rental income will be taxed in the hands of .............. for the Assessment Year 2022-23.

(A)Sneha

(B)Bhuvana

(C)Sneha or Bhuvana, whoever is having higher income during the previous year

(D)As per discretion of Assessing Officer

Two Children had separate income of ₹ 2,000 and ₹ 1,000 respectively which have to be clubbed to the income of their father Mr. X for the assessment year 2021-22. What amount of Income will be exempted from father’s income?

(A)₹ 1,000

(B)₹ 2,000

(C)₹ 3,000

(D)₹ 2,500

Pinky (a minor child of age 5 years) gets a gift on 20.11.2020 of ₹ 10,00,000 from her father’s friend. On the same day, the amount of ₹ 10,00,000 was deposited as fixed deposit for 3 years in SBI in the name of Pinky by her father. Interest of ₹ 35,000 was credited on such fixed deposit during the P.Y. 2020-21. State the amount of income and in whose hands the same will be subject to tax in A.Y. 2021-22.

(A)Income of ₹ 10,33,500 shall be taxable in the hands of father.

(B)Income of ₹ 33,500 shall be taxable in the hands of father

(C)Income of ₹ 10,33,500 shall be taxable in the hands of father or mother whose income before this clubbing is higher.

(D)Income of ₹ 33,500 shall be taxable in the hands of father or mother, whose income before this clubbing is higher.

On 31.10.2020, Raju (Minor child) gets a gift of ₹ 15,00,000 from his father’s friend. On the same day, the amount is deposited as fixed deposit in Raju’s bank account. On the said deposit, interest of ₹ 15,000 was earned during the F.Y. 2020-21. ln whose hands the income of Raju shall be taxable ? (Assessee has not opted for section 115BAC).

(A)Income of ₹ 15,13,500 shall be taxable in the hands of Raju’s father.

(B)lncome of ₹ 15,15,000 shall be taxable in the hands of Raju’s father.

(C)lncome of ₹ 15,13,500 shall be taxable in the hands of Raju’s father or mother, whose income before this clubbing is higher.

(D)lncome of ₹ 15,15,000 shall be taxable in the hands of Raju’s father or mother, whose income before this clubbing is higher

Dr. Kumar gifted a property fetching monthly rental income of ₹ 1,00,000 to his son’s wife Divya on 31.05.2020 by executing a gift settlement deed. She paid municipal tax of ₹ 30,000 on 10.12.2020. Based on court decree arrear rent of ₹ 4 lakhs was paid by ex-tenant to present owner Divya on 01.03.2021. How much of income of Divya would be clubbed in the hands of Dr. Kumar ?

(A)₹ 8.19 lakhs

(B)₹ 10.99 lakhs

(C)₹ 10.79 lakhs

(D)₹ 6.79 lakhs

Minor Shruti (age 13) has following incomes; (i) Net income from Dancing ₹ 75,000; (ii) Interest on bank fixed deposits ₹ 62,000 and (iii) Cash gift from friends of her parents (non-relatives) ₹ 45,000. How much of her income would be clubbed with the income of her parents after deduction under section 10(32) of the Act ?

(A)60,500

(B)1,80,500

(C)1,05,500

(D)73,500

Where the income of an individual includes any income of his minor child as per section 64(1A) of the Act; such individual shall be entitled to claim exemption of a certain amount (not exceeding the income clubbed) as per section 10(32). The amount of exemption available is --------

(A)₹ 1,500 in respect of each minor child

(B)₹ 1,500 in respect of each minor child but maximum of two children

(C)₹ 2,000 in respect of each minor child

(D)₹ 3,000 in respect of each minor child

Rajkamal has four minor children (2 daughters and 2 sons). The annual income of two daughters was ₹ 9,000 and ₹ 4,500 and of two sons was ₹ 6,000 and ₹ 4,000 for the financial year 2019-20. The income does not accrue or arise to any of the minor children on account of any manual work done by them or activity involving application of their skill, talent or specialized knowledge and experience. The daughter who has income of ₹ 4,500 was suffering from a disability specified under section 80U. The amount of income earned by all the minor children to be clubbed as per section 64(1A) of Act in the hands of Rajkamal for the assessment year 2020-21 is ________

(A)₹ 23,500

(B)₹ 14,500

(C)₹ 17,500

(D)₹ 19,000

Income of interest received by a minor child on a fixed deposit with a bank made out of/from the amount of scholarship received from the State Government is _________

(A)exempt from tax

(B)to be clubbed with the income of father

(C)to be assessed in the hands of the minor child

(D)to be clubbed with the income of that parent whose total income, before including minor’s income is higher

Revocable transfer of asset as per section 61 of the Income Tax Act, 1961 includes the transfer which gives a right to ______ of the asset or the income from such asset or assets during the _________ of transferee.

(A)Re-assume power; Life time

(B)Revoke; Life time

(C)Transfer; Discretion

(D)Re-locate; Period of 10 years

Income from assets as per section 64(1)(iv) shall not be included in the income of transferor where any individual transfers directly or indirectly any asset other than house property to the spouse when _______

(A)has received adequate consideration

(B)has been made with an agreement to live apart

(C)after the death of either transferor or transferee

(D)all in A, B & C

Rohit is working as Company Secretary in Raj Chem Pvt. Ltd. on a salary of ₹ 20,000 p.m. He got married to Pooja who holds 25% shares of this Company. What will be the impact of salary paid to Rohit by the company in the hands of Pooja ?

(A)No amount to be clubbed

(B)Club 50% salary

(C)Club 100% salary

(D)25% salary be clubbed

Transfer of income is revocable in the following cases :

(A)Sale with a condition of re-purchase

(B)Power to change beneficiary or trustees

(C)Both (A) and (B)

(D)Neither (A) nor (B)

(d)A gifted debentures of Ria Ltd., to a girl B in March, 2015. Later, B married to A’s son C in March, 2017. B received interest of ₹ 1,40,000 from the debentures in the Previous Year 2018-19. The Assessing Officer (AO) added the interest income of B with the income of A under the provisions of Section 64(1) (vi). Comment on the action of the AO.

Kapoor gifted ₹ 10,00,000 to his wife Sunita Kapoor on 15th May, 2017. The amount of gift of ₹ 10,00,000 was invested by his wife in debentures of a company on 1st June, 2017 earning interest @ 12% p.a. The income of interest of ................. from the debentures earned by Sunita Kapoor shall be .............. with the income of Kapoor in A.Y. 2018-19.

(A)₹ 1,20,000, not clubbed

(B)₹ 1,00,000, clubbed

(C)₹ 1,00,000, not clubbed

(D)₹ 1,20,000, clubbed

All income which arises or accrues to the minor child (not suffering from any disability as specified in section 80 U) shall be clubbed with the income of parent whose total income excluding the income to be included of the minor not derived from any activity involving application of his skill, talent or specialized knowledge :

(A)in the hands of father only

(B)in the hands of mother only

(C)equally in the hands of both mother and father

(D)with the income of that parent whose total income is greater before clubbing of such income