Section 109 - Set off of losses under any other head of income
After same-head adjustment, most current-year non-capital losses may be considered against another head, including capital gains. Two major barriers apply: business loss cannot be set off against salary, and current-year house-property loss can be set off against other heads only up to ₹2 lakh. Capital loss never moves outside the capital-gains head.
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
After same-head adjustment, most current-year non-capital losses may be considered against another head, including capital gains. Two major barriers apply: business loss cannot be set off against salary, and current-year house-property loss can be set off against other heads only up to ₹2 lakh. Capital loss never moves outside the capital-gains head.
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 109.
Old-law bridge
1961 Act section 71
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 The ₹2 lakh is a ceiling on inter-head adjustment, not on the computation of the house-property loss itself.
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
An individual under the regular regime has salary of ₹12 lakh, house-property loss of ₹3.20 lakh and bank interest of ₹40,000. At most ₹2 lakh of the house-property loss may reduce income under other heads. The remaining ₹1.20 lakh moves to section 110. Under section 202's default regime, house-property loss cannot be set off against another head and the special deemed-effect rule must also be checked.
Evidence / compliance checklist
- Build a section 109 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 109: Set off of losses under any other head of income).
- For reorganisations, retain scheme orders, ownership continuity, asset/business continuity and predecessor-successor tax records (section 109: Set off of losses under any other head of income).
- Prevent double use by reconciling the carry-forward schedule to each later return before set-off (section 109: Set off of losses under any other head of income).
Common mistake
Using a single “loss carried forward” figure for section 109 without preserving head/source restrictions, filing conditions and the remaining statutory period.
Recommended approach
For section 109, fix the governing tax year, identify the operative sub-section for “Set off of losses under any other 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
- 109. (1) Subject to the provisions of this Chapter, for any tax year, if income computed under any head of income (other than “Capital gains”) is a loss,
- including “Capital gains”, if any, assessable for that tax year, subject to the following
- extent of ₹ 200000 against income under any other head.
- (2) For any tax year, the loss under the head “Capital gains” shall not be set off
Judicial / interpretive bridge
No section-specific Supreme Court bridge is included for section 109 unless text-equivalence with the 2025 Act has been checked. Legacy cases should not be transplanted into section 109 merely because the subject is similar.
Related provisions
Current statutory text
Primary-source trail
FAQs
What does section 109 of the Income-tax Act, 2025 cover?
Section 109 covers set off of losses under any other 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 109?
Taxpayers with current-year or carried-forward losses under the relevant head or specified activity This applicability note is specific to section 109.
Are there specific Rules or Forms for section 109?
No provision-specific Rule/Form independently mapped in this tranche.