Intra-Head Set-off

Section 108 — INTRA-HEAD SET-OFF (1961 s. 70 SUCCESSOR)

Section 108 is the substantive equivalent of 1961 s. 70 — opening section of Chapter VII (Set-off & Carry Forward). Sub-section (1): Within the SAME head of income (other than CG), losses from one source may be set off against income from another source within the same head in the same tax year. Sub-section (2): For Capital Gains, loss from one capital asset may be set off against income from another capital asset of the SAME CHARACTER (STCG vs. STCG; LTCG vs. LTCG / STCG).

INTRA-HEAD SET-OFF HIERARCHY

(I) PGBP — loss from one business set off against profits of another business; speculation-loss restricted to speculation-profit (s. 113); specified-business-loss restricted to specified-business-profit (s. 114). (II) HOUSE PROPERTY — loss from one HP set off against income from another HP. (III) CAPITAL GAINS — STCL set off against STCG OR LTCG (preferred against STCG); LTCL ONLY against LTCG (cannot offset STCG). (IV) OTHER SOURCES — loss from one source set off against another OS source; horse-race / lottery losses NOT set off (s. 94 disallows). (V) SALARIES — no concept of 'loss' under salaries; not relevant.

PLANNING NOTES

(i) For diversified businesses, intra-PGBP set-off is automatic — no election. (ii) For HP-loss (typical: self-occupied loss from interest > rent), maximum ₹ 2 lakh against any-head u/s 109; balance carried forward u/s 110. (iii) CG planning: pair STCL with STCG (lower tax saving but immediate); LTCL only with LTCG (must hold LTCL-yielding assets till LTCG materialises). (iv) Maintain source-wise loss / profit ledger by head — facilitates inter-head set-off (s. 109) and carry-forward (ss. 110-114).

CROSS-REFERENCES

• Section 109 — Inter-head set-off.
• Section 110-114 — Carry-forward provisions.
• Section 113 — Speculation-loss restriction.
• Section 114 — Specified-business-loss restriction.