I have actually declared company losses 2 years back under the old tax obligation program. I lugged them onward in my in 2014 Income Tax Return (ITR), once again under the old program. In the existing analysis year, I am intending to switch over to the brand-new program. Can I continue the losses reported in the old program in 2014?
New tax obligation program was made the default tax obligation system for people from the last analysis year 2024– 25, unless they pull out of it to select the old program. Taxpayers with company revenue need to walk thoroughly, particularly those continuing company losses or unabsorbed devaluation from earlier years while choosing in between the old and brand-new program this year.
As per Section 115BAC( 2) of the Income Tax Act, taxpayers can not establish off carried-forward company losses or devaluation if they associate with reductions that are not permitted under the brand-new program. These reductions consist of extra devaluation under Section 32( 1 )( iia), investment-linked reductions (e.g., Sections 35AD, 35( 1 )( ii)/( iia)/( iii), 33AB, 33ABA) and phase VI-A reductions (other than 80CCD( 2 ), 80CCH( 2) and 80JJAA). Any losses that are not connected to the above, that includes normal company expense or standard devaluation (under Section 32( 1 )( ii)) can still be continued and trigger, also under the brand-new program.
Here are 2 functional situations of company losses that can be continued in the brand-new tax obligation program. One, an investor sustained loss as a result of normal costs like rental fee, income, electrical energy etc. The nature of these reductions is typical company expense, and therefore the losses that occurred on subtracting these costs can be continued. Another instance is a consultant asserting unabsorbed devaluation on a laptop computer (typical price).
Now, below are 2 functional situations where continuing of losses will not be allowed the brand-new program– a) a supplier declared loss as a result of extra devaluation on equipment and b) a start-up declared reduction under Section 35AD, which is a capital expense and therefore not permitted.
Taxpayers need to evaluate their carried-forward losses item-wise. If significant previous losses associate with now-disallowed reductions, switching over to the brand-new program might surrender their set-off. In such instances, one can still pull out of the brand-new program by declaring Form 10-IEA on or prior to the due day of return.
However, if the losses refer to common company procedures or typical devaluation, the brand-new program does not prevent their set-off.
The brand-new program provides reduced tax obligation prices yet less reductions. Hence, a relative tax obligation calculation– considering qualified losses– is necessary.
Bhawna Kakkar, legal accounting professional and creator, Kakkar & & Company, Chartered Accountants
