Intra-Head Adjustment
Introduction
Intra-head adjustment allows the set-off of losses from one source of income against income from another source within the same head of income. Specific rules and exceptions govern these adjustments, such as limiting long-term capital losses to only long-term capital gains.
General Rules for Intra-Head Adjustment
- Losses from one source can be set-off against profits from another source within the same head of income.
o Example: Loss from one house property can be adjusted against income from another house property.
- Types of permissible adjustments:
o House Property Loss: Set-off against other house property income.
o Short-Term Capital Loss: Adjustable against both long-term and short-term capital gains.
o Non-Speculative Business Loss: Can be adjusted against speculative, non-speculative and specified business income.
Exceptions to Intra-Head Adjustment
There are certain exceptions to the general rule.
- Long-Term Capital Loss:
o Can only be set-off against long-term capital gains.
- Speculation Losses:
o Only adjustable against speculation profits.
- Specified Business Loss:
o Loss from specified business under Section 35AD can only be adjusted against profits from other specified businesses.
- Race Horses:
o Losses incurred on owning/maintaining race horses can only be set-off against income from the same source.
- Gambling Losses:
o Losses from gambling activities cannot be set-off against any income, including gambling winnings.
- Virtual Digital Assets:
o Losses from the transfer of virtual digital assets, cannot be adjusted against any income, including gains from another VDAs.
- Undisclosed Income:
o Losses whether brought forward or otherwise, or unabsorbed depreciation cannot be set-off against undisclosed income discovered during searches or surveys or requisition under Section 79A.
- Unexplained Income:
o Losses are not adjustable against unexplained income taxable under Section 115BBE.
- Specified Trust/Institution Income:
o Losses of any trust, fund or institution referred to in sub-clause (iv), (v), (vi) and (via) of Section 10(23C) or Section 11 cannot be set-off against specified income under Section 115BBI.