Section 71B of the Income-tax Act, 1961: Carry Forward and Set-Off of House Property Loss
Section 71B explains how an unabsorbed loss under the head Income from house property can be carried forward and adjusted against future house property income, subject to an eight-assessment-year limit.
What does Section 71B provide?
Where the computation of income from house property results in a loss for an assessment year, and that loss cannot be fully set off against income under other heads in accordance with Section 71, the unabsorbed amount is carried forward, subject to the other provisions of the Chapter.
Clause (i): In a subsequent assessment year, the carried-forward loss is set off against income assessable under the head Income from house property.
Clause (ii): Any remaining unabsorbed balance may be carried forward further, but not beyond eight assessment years immediately succeeding the assessment year for which the loss was first computed.
Legislative history: Section 71B was inserted by the Finance (No. 2) Act, 1998 (Act 21 of 1998), section 26, with effect from 1 April 1999.
Key terms and conditions explained
House property loss
A negative amount computed under the head Income from house property, after applying the applicable rules for annual value and permitted deductions, including qualifying interest on borrowed capital. The amount must be computed under the law relevant to the tax year.
Inter-head set-off in the year of loss
Under Section 71(3A) of the 1961 Act, the house property loss that may be set off against income under another head is limited to Rs. 2,00,000 for the relevant years. This is a ceiling on inter-head adjustment, not on the computation of the house property loss itself. Other applicable restrictions may also affect the result.
Carry forward for eight assessment years
Loss left unadjusted may be carried forward for up to eight immediately succeeding assessment years. It can be adjusted only against house property income in those years, not against salary, business income or capital gains.
Assessment year and tax year
Under the 1961 Act, an assessment year generally follows the financial year in which income arises. The Income-tax Act, 2025 uses the concept of a tax year; care is required when comparing provisions across the two statutes.
Illustrative calculations
| Particulars | Illustration A | Illustration B |
|---|---|---|
| House property loss | Rs. 3,50,000 | Rs. 1,20,000 |
| Other-head income available for set-off | Rs. 6,00,000 | Nil |
| Current-year inter-head set-off (assuming eligibility) | Rs. 2,00,000 | Nil |
| Loss available for carry forward | Rs. 1,50,000 | Rs. 1,20,000 |
These simplified examples illustrate the mechanics under the 1961 Act. Actual tax treatment depends on the assessment year, applicable tax regime, deductions, filing conditions and other restrictions.
Example of adjustment in a later year
Suppose an eligible carried-forward house property loss is Rs. 1,50,000 and the following assessment year has taxable house property income of Rs. 90,000. The amount set off is Rs. 90,000; the remaining Rs. 60,000 may continue to be carried forward within the original eight-year window.
Difference between Section 71 and Section 71B
| Provision | Function |
|---|---|
| Section 71 | Controls eligible set-off of a loss from one head against income under another head in the same assessment year. |
| Section 71B | Permits the unabsorbed house property loss to be carried forward and set off against future house property income for up to eight assessment years. |
| Section 71A | Historical transitional treatment for specified house property losses relating to assessment years 1993-94 and 1994-95; not a general present-day carry-forward rule. |
Income-tax Act, 2025 and official references
The Income-tax Act, 2025 came into force on 1 April 2026. It reorganises the statutory framework and includes rules for set-off and carry forward of losses. The precise provision and any transitional effect should be checked against the official text for the tax year in question. This historical Section 71B article should not be treated as a substitute for that text.
- Income Tax Department: Income-tax Act, 1961
- Income Tax Department: official website and legislative resources
- India Code: official central legislation repository
Frequently asked questions
For how many years can a house property loss be carried forward under Section 71B?
For up to eight assessment years immediately following the assessment year in which the loss was first computed, subject to the applicable provisions.
Can carried-forward house property loss be set off against salary?
No. A loss carried forward under Section 71B can be adjusted against income from house property in a subsequent year. Same-year inter-head set-off is a separate question governed by Section 71 and its restrictions.
Is the Rs. 2 lakh limit the maximum loss that may be carried forward?
No. Under the relevant 1961 Act rules, the Rs. 2 lakh ceiling relates to eligible same-year inter-head set-off. The balance of a computed loss may be carried forward, subject to the law.
Does the eight-year period restart after a partial set-off?
No. The statutory window is measured from the assessment year in which the loss was first computed.
This article is general legal information, not a substitute for advice on a particular return or assessment.