Section 115 — Specified Activity Loss

Section 115 is the substantive equivalent of 1961 s. 73 B / s. 115 VC-VR (Tonnage Tax) carry-forward rules. It creates a SEPARATE COMPARTMENT for losses from 'specified activities' — typically tonnage-tax shipping / racehorse owning /…

Section 115 — Set off and carry forward of losses from specified activity

Section 115 continues 1961 s. 74A(3). The “specified activity” is owning and maintaining race horses (s. 115(4)(e)). A loss from it may be set off only against income from the same activity, in the year or in a later year in which the activity is carried on, and may be carried forward for no more than four tax years after the year in which it was first computed (s. 115(1) to (3)).

The loss is the amount by which stake money, if any, falls short of the revenue expenditure incurred wholly and exclusively on maintaining race horses (s. 115(4)(c)). The section sits beside s. 113 (speculation business) and s. 114 (specified business), which also confine a loss to its own source.

Statutory text — Income-tax Act, 2025

Marginal note — Set off and carry forward of losses from specified activity

(1) Any loss incurred by the assessee in specified activity in any tax year shall be set off only against income from specified activity.

(2) Where for any tax year, loss computed in respect of a specified activity cannot be wholly set off under sub-section (1), so much of the loss not so set off or the whole loss, as the case may be, shall be carried forward to the following tax year and—

(i) be set off against the income, if any, of the specified activity carried on by him for such tax year; and

(ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following tax year and so on.

(3) No loss shall be carried forward under this section for more than four tax years immediately succeeding the tax year for which the loss was first computed.

(4) For the purposes of this section—

(a) “horse race” means a horse race upon which wagering or betting may be lawfully made;

(b) “income by way of stake money” means the gross amount of prize money received on a race horse or race horses by the owner thereof on account of the horse or horses or any one or more of the horses winning a particular position in horse race;

(c) “loss incurred by the assessee in specified activity” means the amount by which the income by way of stake money, if any, falls short of the expenditure, not being capital expenditure, incurred wholly and exclusively for maintaining race horses;

(d) “race horses” means horses owned and maintained by assessee for running in a horse race;

(e) “specified activity” means the activity of owning and maintaining race horses.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
s. 115(1) — race-horse loss set off only against income from owning and maintaining race horses	s. 74A(3), opening words
s. 115(2), (3) — carry forward, for no more than four tax years	s. 74A(3)(a), (b)
s. 115(4) — “horse race”, “income by way of stake money”, the loss, “race horses”, “specified activity”	s. 74A(3), Explanation. The 1961 Act defined stake money by a horse “winning or being placed second or in any lower position”; this Act says “winning a particular position”.

POINTS TO NOTE

(i) Section 115 has nothing to do with tonnage tax. (ii) Winnings from a horse race are a separate matter: they are income from other sources (see s. 92), and the loss rules of s. 115 do not apply to them.

CROSS-REFERENCES

Section 113 — losses in speculation business.
Section 114 — losses of a specified business.

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