Section 70 of the Income-tax Act, 1961: Set-Off of Losses Under the Same Head
Section 70 explains when a loss from one source of income can be adjusted against income from another source within the same head of income. This is called intra-head set-off. The corresponding rule under the Income-tax Act, 2025 is Section 108.
What is intra-head set-off of losses?
Indian income-tax law groups taxable income under statutory heads, including income from house property, profits and gains of business or profession, capital gains and income from other sources. Where one source produces a loss and another source under the same head produces income, the law may allow the loss to be adjusted against that income in the same year. The calculation is subject to restrictions for particular activities and types of income.
Section 70 of the Income-tax Act, 1961: Explanation of sub-sections
Section 70(1): Losses other than capital gains
Subject to other provisions of the Act, where a source under a head of income other than capital gains results in a loss for an assessment year, the assessee may set off that loss against income from another source under the same head. This is not an unrestricted right: special statutory rules can limit or prohibit an adjustment.
Section 70(2): Short-term capital loss
A loss calculated under the capital-gains provisions in respect of a short-term capital asset may be set off against gains from another capital asset, whether short-term or long-term, in the same assessment year, subject to applicable provisions.
Section 70(3): Long-term capital loss
A loss calculated in respect of a long-term capital asset may be set off only against gains from another long-term capital asset. It cannot be adjusted against short-term capital gains.
The statutory reference to computation under Sections 48 to 55 concerns the computation and related rules for capital gains. The original page also recorded that Section 70 was substituted by the Finance Act, 2002, with effect from 1 April 2003.
Capital gains: Which losses can be adjusted?
| Nature of loss | Against short-term gains | Against long-term gains |
|---|---|---|
| Short-term capital loss (STCL) | Yes | Yes |
| Long-term capital loss (LTCL) | No | Yes |
Capital losses cannot be set off against salary, house-property income, business profits or income from other sources. The treatment of gains or losses from certain special categories, including virtual digital assets, requires separate examination.
Important restrictions and special provisions
- Speculation business: A speculation-business loss is generally restricted to profits of another speculation business. Non-speculative business losses may, subject to the Act, be adjusted against speculation profits.
- Specified business: Losses from specified businesses covered by Section 35AD and Section 73A are subject to separate set-off restrictions.
- Racehorses: Losses from the activity of owning and maintaining racehorses have a special statutory treatment.
- Lottery and similar winnings: Losses cannot be adjusted against income from specified winnings that are taxed under special rules.
- Virtual digital assets: The special regime restricts deductions and prohibits set-off of losses from transfers of virtual digital assets.
Each category must be tested under the relevant provision rather than assuming all losses under the same head are interchangeable.
Corresponding law: Section 108 of the Income-tax Act, 2025
The Income-tax Act, 2025 took effect from 1 April 2026. Its Section 108, "Set off of losses under same head of income", corresponds to Section 70 of the 1961 Act. Section 108(1) provides for intra-head set-off outside capital gains, subject to other provisions. Section 108(2)(a) covers short-term capital losses and Section 108(2)(b) covers long-term capital losses.
The Income Tax Department's transition guidance confirms that the fundamental structure of intra-head set-off has not changed. For tax years beginning before 1 April 2026, the repeal and saving provisions, including Section 536, must be considered. Eligible brought-forward losses can continue subject to their original conditions and time limits.
Other connected provisions under the 2025 Act include Section 109 (inter-head set-off), Section 111 (carry forward of capital losses), and Section 112 (carry forward of business losses).
Practical examples
Example 1: Loss from one business, profit from another
An assessee earns Rs. 6,00,000 from a non-speculative business and incurs a loss of Rs. 2,00,000 from another eligible non-speculative business in the same year. Subject to the applicable provisions, the loss may be adjusted, leaving Rs. 4,00,000 under that head before other relevant adjustments.
Example 2: Short-term capital loss
A short-term capital loss of Rs. 80,000 and long-term capital gains of Rs. 1,50,000 arise in the same year. Where both amounts are eligible for set-off, the short-term loss may be adjusted against the long-term gain, leaving Rs. 70,000.
Example 3: Long-term capital loss
A long-term capital loss of Rs. 90,000 cannot be adjusted against a short-term capital gain of Rs. 1,20,000. The long-term loss may be carried forward if the statutory conditions, including timely return filing requirements, are met.
Intra-head vs inter-head set-off
Intra-head set-off adjusts a loss from one source against income from another source within the same head (Section 70 of the 1961 Act; Section 108 of the 2025 Act). Inter-head set-off concerns adjustment between different heads and is governed by Section 71 of the 1961 Act and Section 109 of the 2025 Act, subject to separate restrictions.
Official statutory provisions and guidance
- Income Tax Department: Section 70, Income-tax Act, 1961
- Income Tax Department: Income-tax Act, 2025 (official PDF; see Section 108)
- Income Tax Department: Set-off and carry-forward of losses
- Income Tax Department: Transition FAQs, Topic 8