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​What is the meaning of inter-head adjustment?

Open uri20170510 32134 7ezpi6?1494421819 jaggu asked almost 3 years ago

Hi I want to know, ​What is the meaning of inter-head adjustment? ​

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4 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Surbhi answered over 2 years ago

Meaning of inter-head adjustment After making intra-head adjustment (if any) the next step is to make inter-head adjustment. If in any year, the taxpayer has incurred loss under one head of income and is having income under other head of income, then he can adjust the loss from one head [As amended by Finance Act, 2015] against income from other head, E.g., Loss under the head of house property to be adjusted against salary income. Restrictions to be kept in mind while making inter-head adjustment of loss Following restrictions should be kept in mind before making inter-head adjustment: 1) Before making inter-head adjustment, the taxpayer has to first make intra-head adjustment. 2) Loss from speculative business cannot be set off against any other income. However, non-speculative business loss can be set off against income from speculative business. 3) Loss under head “Capital gains” cannot be set off against income under other heads of income. 4) No loss can be set off against income from winnings from lotteries, crossword puzzles, race including horse race, card game, and any other game of any sort or from gambling or betting of any form or nature. 5) Loss from the business of owning and maintaining race horses cannot be set off against any other income. 6) Loss from business specified under section 35AD cannot be set off against any other income (section 35AD is applicable in respect of certain specified businesses like setting up a cold chain facility, setting up and operating warehousing facility for storage of agricultural produce, developing and building housing projects, etc.) 7) Loss from business and profession cannot be set off against income chargeable to tax under the head “Salaries”.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 2 years ago

Adjusting loss from one head against any gain under the same head is called 'inter-source' adjustment. For example: You have two businesses 'A' & 'B'. Business 'A' is making a loss, while business 'B' is making profit. Then, the loss from business 'A' can be set-off against profit from business 'B'. Set-off means the process of reducing one’s income using losses under other heads or same head of income.

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Open uri20170510 32134 1c996lj?1494421732 Anil answered almost 3 years ago

Taxpayers earn income from salary, house property, business or profession, capital gains and income from other sources. There cannot be a loss from salary and income from other sources. However, we could suffer losses under other heads of income such as loss from house property, business loss and capital loss. Adjusting loss from one head against any gain under the same head is called 'inter-source' adjustment. For example: You have two businesses 'A' & 'B'. Business 'A' is making a loss, while business 'B' is making profit. Then, the loss from business 'A' can be set-off against profit from business 'B'. Set-off means the process of reducing one’s income using losses under other heads or same head of income. Similarly, if you have two house properties, one self occupied and the other on rent. Loss from the first property can be adjusted against the income from the second property. If the losses cannot be set-off fully through inter-source adjustment, they can next be set-off against other heads of income. This is called “inter-head” adjustment. Inter-source adjustment: Setting-off loss under the same head of income. Inter-head adjustments: If the loss is still existing, loss can be set-off from other heads of income (subject to certain restrictions). Carry forward of losses: If loss still persists, the same can be carried forward to the subsequent assessment years. However this inter-source adjustment is subject to certain exceptions listed below: Exception Description 1 Loss in a speculation business Loss from speculation business cannot be set-off against any income other than a speculative income. 2 Long term capital loss Long term capital loss can be set-off against long term capital gains only. 3 Loss from the activity of owning & maintaining race horses Loss incurred from the activity of owning & maintaining race horses can be set-off only against income from such business & not against any other income. 4 Business loss Business losses cannot be set-off against salary income 5 Loss cannot be set off against winnings from lotteries, crossword puzzles etc. A loss under any head of income cannot be set off against winnings from lotteries, crossword puzzles, races (including horse races), card games or any other games of any sort or from gambling or betting of any form or nature. Except the above five cases, any loss can be set-off against any income from that source. For instance: Loss from house property can be set off against income from any other house property. Loss from a non speculation business can be set off against income from speculation or non speculation business. Short term capital gain can be set off against any capital gains whether long term or short term. Income from other sources (except loss from activity of owning & maintaining race horses) can be set off against any income other than winnings from lotteries etc. (Mentioned in exception 5 in the table). Let's assume: Mr X has the following income from business & profession: Profit from his professional practice of a lawyer: Rs. 2.5 lakh Loss from his proprietary business: Rs. 1.75 lakh Net Income chargeable under Profits & gains from Business & Profession will be Rs. 75,000 (Rs. 2.5 lakh less Rs. 1.75 lakh) Mr. Y has incurred a Short term capital loss of Rs. 15 lakh and has made a long term capital gain of Rs. 32 lakh: Net Income chargeable under capital gains head is Rs. 17 lakh (Rs. 32 lakh less Rs. 15 lakh).

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Chirag answered almost 3 years ago

Taxpayers earn income from salary, house property, business or profession, capital gains and income from other sources. There cannot be a loss from salary and income from other sources. However, we could suffer losses under other heads of income such as loss from house property, business loss and capital loss. Adjusting loss from one head against any gain under the same head is called 'inter-source' adjustment. For example: You have two businesses 'A' & 'B'. Business 'A' is making a loss, while business 'B' is making profit. Then, the loss from business 'A' can be set-off against profit from business 'B'. Set-off means the process of reducing one’s income using losses under other heads or same head of income. Similarly, if you have two house properties, one self occupied and the other on rent. Loss from the first property can be adjusted against the income from the second property. If the losses cannot be set-off fully through inter-source adjustment, they can next be set-off against other heads of income. This is called “inter-head” adjustment. •Inter-source adjustment: Setting-off loss under the same head of income. •Inter-head adjustments: If the loss is still existing, loss can be set-off from other heads of income (subject to certain restrictions

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