Section 112 - Carry forward and set off of business loss
Ordinary business loss that cannot be fully absorbed may be carried for eight tax years. In later years it can be set off only against profits and gains of business or profession. Section 112(3) expressly gives carried-forward business loss priority over carried-forward allowances under section 33(11) or 45(7).
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
Ordinary business loss that cannot be fully absorbed may be carried for eight tax years. In later years it can be set off only against profits and gains of business or profession. Section 112(3) expressly gives carried-forward business loss priority over carried-forward allowances under section 33(11) or 45(7).
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 112.
Old-law bridge
1961 Act section 72
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 Current-year business loss and brought-forward business loss have different inter-head flexibility. A brought-forward business loss cannot be used against capital gains, house property or other sources.
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 company has brought-forward business loss of ₹30 lakh and unabsorbed depreciation of ₹20 lakh. Current business profit is ₹35 lakh. Subject to the relevant computations, the brought-forward business loss is applied first, leaving ₹5 lakh business profit against which the unabsorbed allowance can then be considered.
Evidence / compliance checklist
- Build a section 112 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 112: Carry forward and set off of business loss).
- For reorganisations, retain scheme orders, ownership continuity, asset/business continuity and predecessor-successor tax records (section 112: Carry forward and set off of business loss).
- Prevent double use by reconciling the carry-forward schedule to each later return before set-off (section 112: Carry forward and set off of business loss).
Common mistake
Using a single “loss carried forward” figure for section 112 without preserving head/source restrictions, filing conditions and the remaining statutory period.
Recommended approach
For section 112, fix the governing tax year, identify the operative sub-section for “Carry forward and set off of business loss”, 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
- 112. (1) Where for any tax year, loss computed under the head “Profits and gains
- be carried forward to the following tax year and—
- (i) be set off against the profits and gains, if any, of any business or profession carried on by him for that tax year; and
- shall be carried forward to the following tax year and so on.
- (2) No loss shall be carried forward under this section for more than eight tax years
- immediately succeeding the tax year for which the loss was first computed.
Judicial / interpretive bridge
No section-specific Supreme Court bridge is included for section 112 unless text-equivalence with the 2025 Act has been checked. Legacy cases should not be transplanted into section 112 merely because the subject is similar.
Related provisions
- Section 109
- Section 33
- Section 111
- Section 113
Current statutory text
Primary-source trail
FAQs
What does section 112 of the Income-tax Act, 2025 cover?
Section 112 covers carry forward and set off of business loss. 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 112?
Taxpayers with current-year or carried-forward losses under the relevant head or specified activity This applicability note is specific to section 112.
Are there specific Rules or Forms for section 112?
No provision-specific Rule/Form independently mapped in this tranche.