Section 114 - Set off and carry forward of losses computed in respect of specified business
Loss from a specified business referred to in section 46 is ring-fenced to profits from any specified business. The text permits the unabsorbed amount to continue to following tax years and does not impose the eight-year or four-year limit used in nearby sections.
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
Loss from a specified business referred to in section 46 is ring-fenced to profits from any specified business. The text permits the unabsorbed amount to continue to following tax years and does not impose the eight-year or four-year limit used in nearby sections.
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 114.
Old-law bridge
1961 Act section 73A
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 Do not merge specified-business loss with ordinary business loss. Separate project-level computation and evidence are essential.
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 ₹25 lakh loss from one eligible specified business and ₹12 lakh profit from another specified business in the next year. Subject to section 46 and the applicable regime, ₹12 lakh may be absorbed and ₹13 lakh may continue.
Evidence / compliance checklist
- Build a section 114 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 114: Set off and carry forward of losses computed in respect of specified business).
- For reorganisations, retain scheme orders, ownership continuity, asset/business continuity and predecessor-successor tax records (section 114: Set off and carry forward of losses computed in respect of specified business).
- Prevent double use by reconciling the carry-forward schedule to each later return before set-off (section 114: Set off and carry forward of losses computed in respect of specified business).
Common mistake
Using a single “loss carried forward” figure for section 114 without preserving head/source restrictions, filing conditions and the remaining statutory period.
Recommended approach
For section 114, fix the governing tax year, identify the operative sub-section for “Set off and carry forward of losses computed in respect of specified business”, 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
- (2) Where for any tax year, loss computed in respect of a specified business cannot
- loss, as the case may be, shall be carried forward to the following tax year and—
- carried on by him for such tax year; and
- shall be carried forward to the following tax year and so on.
Judicial / interpretive bridge
No section-specific Supreme Court bridge is included for section 114 unless text-equivalence with the 2025 Act has been checked. Legacy cases should not be transplanted into section 114 merely because the subject is similar.
Related provisions
- Section 46
- Section 113
- Section 115
Current statutory text
Primary-source trail
FAQs
What does section 114 of the Income-tax Act, 2025 cover?
Section 114 covers set off and carry forward of losses computed in respect of specified business. 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 114?
Taxpayers with current-year or carried-forward losses under the relevant head or specified activity This applicability note is specific to section 114.
Are there specific Rules or Forms for section 114?
No provision-specific Rule/Form independently mapped in this tranche.