Rules explained: Old vs New Income Tax Act 2025 - Can you set off or carry forward losses from previous years? Details
The new Income-tax Act, 2025, came into effect on April 1, 2026. If you have carried forward losses from previous financial years to reduce your tax liability in the future, you may wonder whether these losses remain valid under the new tax framework.
The Central Board of Direct Taxes (CBDT), in its FAQs on the interplay and transition from the Income-tax Act, 1961, to the Income-tax Act, 2025, has clarified that the fundamental rules for setting off and carrying forward losses remain unchanged. Here is what taxpayers need to know.
Yes. Losses carried forward under the Income-tax Act, 1961, can continue to be carried forward and set off under the Income-tax Act, 2025. The new law does not restart the time limit for using these losses. The remaining period under the old law continues to apply.
For example, if you incurred an eligible business loss in assessment year (AY) 2023-24, you can carry it forward for up to eight assessment years. But the introduction of the new law does not give you an additional eight years from April 1, 2026.
The basic process remains the same. Losses are first adjusted against income under the same head, wherever permitted. Any remaining loss may then be adjusted against income under another head, subject to the applicable rules.
| Subject | Income-tax Act, 1961 | Income-tax Act, 2025 | What changed from April 1, 2026? |
| Intra-head set-off | Section 70 | Section 108 | No change. Losses are first adjusted against eligible income under the same head. |
| Inter-head set-off | Section 71 | Section 109 | No change. Losses may be adjusted against income under another head, subject to restrictions. |
| House property loss limit | Section 71(3A) | Section 109(1)(b) | No change. The set-off limit against other heads of income remains ₹2 lakh. |
| Capital loss set-off restrictions | Section 71(3) | Section 109(2) | No change. Capital losses can be set off only against eligible capital gains. |
| Business loss carry-forward | Section 72 | Section 112 | 8 years retained |
| Capital loss carry-forward | Section 74 | Section 111 | 8 years retained |
| Speculation business loss | Section 73 | Section 113 | 4 years retained |
| Specified business loss | Section 73A | Section 114 | No change in the treatment of eligible specified business losses. |
| Racehorse activity loss | Section 74A | Section 115 | 4 years retained |
*Source: CBDT FAQs
Yes. The CBDT has clarified that brought-forward losses from house property and capital gains remain eligible for set-off under the new law.
For example, a house property loss from AY 2024-25 can be carried forward and adjusted against eligible house property income in a subsequent tax year.
Similarly, a long-term capital loss from an earlier year can be set off against long-term capital gains, but not short-term capital gains. Short-term capital losses can be adjusted against short-term or long-term capital gains.
A belated return can affect your eligibility to carry forward certain losses. The new law does not revive losses that were ineligible under the old law.
For example, if a salaried employee files their ITR for AY 2026-27 after the July 31 due date, they are not allowed to carry forward the loss for subsequent years. The new law does not automatically make them eligible to carry forward or set off losses of previous years.
No. The restriction continues under the new Act. Brought-forward losses and unabsorbed depreciation cannot be set off against undisclosed income brought to tax in connection with search, requisition or survey proceedings.
Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance. <br><br> She holds a degree in Economics (Hons.) along with an MBA in Finance, which has helped her develop a strong foundation in financial analysis, market understanding, and business reporting. Before joining journalism, she worked with finance and broking firms, where she closely followed market developments, investment strategies, and evolving industry trends. This practical exposure strengthened her understanding of financial markets. She has also written content across multiple formats and platforms, including YouTube, LinkedIn, and Instagram. <br><br> Over time, she has developed expertise in covering market-linked stories, investor-focused topics, and regulatory updates in a simplified yet informative style. She also enjoys reading and listening to Hindi poetry, reflecting her appreciation for literature and creative expression beyond the world of markets and numbers.
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HomeMoneyPersonal FinanceRules explained: Old vs New Income Tax Act 2025 - Can you set off or carry forward losses from previous years? Details
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