Section 108 - Set off of losses under same head of income
Current-year losses are first tested inside the same head. For non-capital heads, a loss from one source can generally absorb income from another source under that same head, unless another provision blocks it. Capital gains use a separate matrix: short-term capital loss can absorb short-term or long-term capital gains, while long-term capital loss can absorb only long-term capital gains.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Current-law control
This page uses the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The Act and Income-tax Rules, 2026 operate from 1 April 2026. Earlier years and saved proceedings remain subject to the repeal-and-savings framework.
Primary statute: Income Tax Department consolidated Act | Rules: Notified Income-tax Rules, 2026
2-minute decode
Current-year losses are first tested inside the same head. For non-capital heads, a loss from one source can generally absorb income from another source under that same head, unless another provision blocks it. Capital gains use a separate matrix: short-term capital loss can absorb short-term or long-term capital gains, while long-term capital loss can absorb only long-term capital gains.
Who should use this section
Taxpayers with current-year or carried-forward losses under the relevant head or specified activity This applicability note is specific to section 108.
Old-law bridge
1961 Act section 70
The bridge is navigational only. A 1961 Act case or rule is carried forward only after checking wording, transition provisions and the current 2025 Act text.
Professional alert
Exception / professional alert Start with source-wise computation. A restriction attached to a particular source or special regime can override the general same-head rule.
Connected Income-tax Rules, 2026 and Forms
No provision-specific Rule/Form is independently mapped in this tranche. General return, procedure and evidence rules can still apply.
Worked application
A taxpayer has short-term capital loss of ₹4 lakh, long-term capital gain of ₹3 lakh and short-term capital gain of ₹1.5 lakh. The short-term loss can be used against both categories, leaving net capital gain of ₹50,000. If the ₹4 lakh loss were long-term, it could be used only against the ₹3 lakh long-term gain; ₹1 lakh would remain to carry forward and the short-term gain would remain taxable.
Evidence / compliance checklist
- Build a section 108 loss ledger showing source, head, tax year of origin, amount used and balance carried forward.
- Preserve the timely return and assessment/intimation that determines the loss where the statute makes filing a condition (section 108: Set off of losses under same head of income).
- For reorganisations, retain scheme orders, ownership continuity, asset/business continuity and predecessor-successor tax records (section 108: Set off of losses under same head of income).
- Prevent double use by reconciling the carry-forward schedule to each later return before set-off (section 108: Set off of losses under same head of income).
Common mistake
Using a single “loss carried forward” figure for section 108 without preserving head/source restrictions, filing conditions and the remaining statutory period.
Recommended approach
For section 108, fix the governing tax year, identify the operative sub-section for “Set off of losses under same head of income”, trace every amount to evidence, apply only verified Rule/Form links, and retain a computation that another reviewer can reproduce from the primary source.
Thresholds, periods and timing checkpoints
- 108. (1) Unless provided otherwise in this Act, for any tax year, if net result of
- his income from any other source under the same head for that tax year.
- (2) Where the net result of computation of income made for any tax year under
- the income, computed in respect of any other capital asset for that year;
Judicial / interpretive bridge
No section-specific Supreme Court bridge is included for section 108 unless text-equivalence with the 2025 Act has been checked. Legacy cases should not be transplanted into section 108 merely because the subject is similar.
Related provisions
Current statutory text
Primary-source trail
FAQs
What does section 108 of the Income-tax Act, 2025 cover?
Section 108 covers set off of losses under same head of income. The operative result depends on the exact statutory conditions shown on this page and applies from 1 April 2026, subject to transition/savings provisions.
Who should check section 108?
Taxpayers with current-year or carried-forward losses under the relevant head or specified activity This applicability note is specific to section 108.
Are there specific Rules or Forms for section 108?
No provision-specific Rule/Form independently mapped in this tranche.