Income Tax Saving: If you have suffered a loss in business, then you can reduce your tax liability. The government provides various facilities to the income tax payers. In which they can adjust their advantages with any disadvantages.
Income Tax Saving: The tax law of the country gives such facilities to the income tax payers, by which you can reduce your tax liability. One of these is to reduce the tax liability by giving information about the loss in business or investment. Under the Income Tax Act, the income earned by the taxpayers has been kept in five major categories. In which salary, house property, capital gains, business or professional and other sources are prominent.
To understand how to reduce your tax liability by adjusting the loss, let’s understand the two methods of loss adjustment. One intra head and the other inter head. Taxpayers can be adjusted for loss from one source of income to other sources of income within the same head. For example, you can set off a loss from Business X with a profit from Business Y.
How is the loss adjusted?
On the other hand, in differential head adjustment, the taxpayer can set off the loss from one head of income source with the income within the other head. For example, suppose you can adjust the head of house property with salary income. Tax experts say that taxpayers should do intrahead adjustments before interhead adjustments.
Capital loss
Capital loss cannot be set off against income falling under any other head. Meaning you can adjust the capital loss with the capital gain only. Also, you can adjust the long term capital loss with the long term capital gain. At the same time, you can adjust short term capital loss with both long term and short term capital gain.
House asset
The law of loss on account of house property is more lenient from the point of view of adjustment. It can be adjusted against income from any other head, but only to the extent of Rs 2 lakh in a particular year. Even if the income tax return is not filed by the deadline, the taxpayer can adjust it for the next eight years. However, in subsequent years, it can be adjusted only from the income from house property. These rules will also apply to commercial property.
