Section 75 Income Tax Act, 1961: Losses of Firms and Legacy Set-Off Rules
Section 75 of the Income-tax Act, 1961 deals with a narrowly defined transitional category of partnership-firm losses from assessment years commencing on or before 1 April 1992. It does not create a general right for partners to set off the losses of a modern partnership firm against their personal income.
What Section 75 provides
The provision applies where a firm incurred a loss relating to an assessment year commencing on or before 1 April 1992, could not set that loss off against its own income, and apportioned the loss to a partner. If the partner could not set off the apportioned amount before the assessment year commencing 1 April 1993, the provision allows the qualifying loss to be set off against the firm's income, provided the partner continues in that firm. Carry-forward and utilisation remain subject to the referenced loss provisions.
Conditions under Section 75
| Requirement | Meaning |
|---|---|
| Eligible period | The loss relates to an assessment year commencing on or before 1 April 1992. |
| Firm-level loss | The loss could not be set off against other income of the firm. |
| Partner allocation | The loss was apportioned to a partner under the earlier law. |
| Unutilised by partner | The partner had not set off that loss before assessment year 1993-94. |
| Continuity of partner | The partner continues in the same firm. |
| Other provisions | Any permissible set-off or carry-forward remains subject to Sections 70, 71, 72, 73, 74 and 74A as relevant. |
Definitions and connected legal provisions
- Firm
- A partnership firm treated as an assessee under the applicable income-tax law. The precise meaning depends on the statutory definition and relevant partnership law.
- Partner
- A person who is a partner in the firm; continued membership is an express condition of Section 75.
- Apportioned loss
- A firm loss allocated to a partner under the former taxation system for partnership firms.
- Set-off
- Adjustment of an eligible tax loss against taxable income as permitted by law.
- Carry-forward
- Transfer of an unutilised eligible loss to a later assessment year, subject to the applicable statutory restrictions.
Relationship with other loss provisions
Section 75 expressly refers to Section 72 (business losses), Section 73 (speculation losses), Section 74 (capital losses) and Section 74A (specified-source losses), alongside Sections 70 and 71. The nature of the original loss determines which restrictions are relevant. For changes in firm constitution and succession, see Section 78.
Illustration of the historical rule
Assume a firm had an eligible loss from assessment year 1992-93 that was apportioned to Partner A under the law then applicable. The firm could not absorb it, and Partner A had not used it before assessment year 1993-94. If Partner A continued in the firm, Section 75 permitted consideration of the qualifying loss at the firm level, subject to the relevant carry-forward and set-off rules. The illustration explains the statutory mechanism; it does not imply that a decades-old loss remains available today.
Why Section 75 is mainly a legacy provision
The provision is tied to the transition in partnership-firm taxation from assessment year 1993-94. For later losses, the normal rules governing the firm itself, filing requirements and applicable loss restrictions should be considered. The Income-tax Act, 2025 now governs tax years beginning on or after 1 April 2026, subject to statutory transition provisions. Do not assume that a historic section number has the same meaning under the new legislation.
Frequently asked questions
Does Section 75 apply to all losses of partnership firms?
No. Its text addresses a narrow transitional category: losses for assessment years commencing on or before 1 April 1992 that were apportioned to a partner but remained unadjusted before assessment year 1993-94.
Can a partner transfer personal losses back to a firm under Section 75?
Not generally. The provision concerns only the historical apportioned losses meeting its specific conditions, including continued membership of the partner in the firm.
How are current partnership-firm business losses ordinarily treated?
For years governed by the Income-tax Act, 1961, ordinary firm losses are assessed and carried forward at the firm level under the applicable loss provisions; Section 75 is not a general mechanism for passing new firm losses to partners.
Does Section 75 remove ordinary carry-forward time limits?
No. It expressly refers to the other set-off and carry-forward provisions, and their relevant restrictions must be checked for the assessment year and category of loss.
Official legal resources
- Income Tax Department, Government of India - official tax law and notifications.
- India Code - central Acts, including income-tax legislation.
- Income Tax e-Filing Portal - compliance information and tax return services.
Original Section 75 wording and amendment history
The following text and amendment note are preserved from the uploaded webpage. They should be read as the historical source extract rather than a statement that such losses remain available for current-year utilisation.
1Where the assessee is a firm, any loss in relation to the assessment year commencing on or before the 1st day of April, 1992, which could not be set off against any other income of the firm and which had been apportioned to a partner of the firm but could not be set off by such partner prior to the assessment year commencing on the 1st day of April, 1993, then, such loss shall be allowed to be set off against the income of the firm subject to the condition that the partner continues in the said firm and to be carried forward for set off under sections 70, 71, 72, 73, 74 and 74A.
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1. Subs. by Act 18 of 1992, s. 39, for sections 75, 76 and 77 (w.e.f. 1-4-1993). Earlier amended by Act 20 of 1974, s. 13 (w.e.f 1-4-1975), Act 11 of 1987, s. 74 (w.e.f. 1-4-1988), omitted by Act 4 of 1988, s. 19 (w.e.f. 1-4-1989) and restored by Act 3 of 1989, s. 95 (w.e.f. 1-4-1989).