Page 91 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes 4.2 Section 71B

Section 71B deals with set-off and carry forward of loss from house property. Before understanding
the provisions relating to set off and carry forward of losses pertaining to house property it is fi rst
essential to know the meaning of income from house property fi rst.
By income from house property we mean the annual value of a property, consisting of any
buildings or lands appurtenant thereto, of which the assessee is the owner, is chargeable to tax
under the head ‘Income from house property’. However, if a house property, or any portion
thereof, is occupied by the assessee, for the purpose of any business or profession, carried on
by him, the profits of which are chargeable to income-tax, the value of such property is not

chargeable to tax under this head.

Thus, three conditions are to be satisfied for property income to be taxable under this head:
1. The property should consist of buildings or lands appurtenant thereto.

2. The assessee should be the owner of the property.
3. The property should not be used by the owner for the purpose of any business or profession

carried on by him, the profits of which are chargeable to income-tax.

Task What do you think are the reasons for incurring losses from house property? You
can also use a hypothetical example of your own.

In any assessment year, if there is a loss under the head ‘Income from house property’, such loss

will first be set-off against income from any other head during the same year. If such loss cannot
be so set-off, wholly or partly, the unabsorbed loss will be carried forward to the following
assessment year to be set-off against income under the head ‘Income from house property’. The
loss under this head is allowed to be carried forward up to 8 assessment years immediately
succeeding the assessment year in which the loss was fi rst computed.

For example, loss from one house property can be adjusted against the profits from another house
property in the same assessment year. Any loss under the head ‘Income from house property’
can be set off against any income under any other head in the same assessment year. However,
if after such set off, there is still any loss under the head “Income from house property”, then the
same shall be carried forward to the next year.

It is to be remembered that once a particular loss is carried forward, it can be set off only against
the income from the same head in the forthcoming assessment years.

Notes A loss from house property can be set off against income from any other head in
the same year.

Any remaining loss can be carried forward for up to 8 years. In these subsequent years,
this loss can be set off only against income from house property.
A loss for a particular year can be carried forward even if the income tax return for that
year is not filed by the due date.

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