Carry Forward of Losses Under Income-tax Act, 2025: Transition Guide
Understand how to prepare records for carry-forward and set-off of losses during the new income-tax law transition.
This guide is written for Indian taxpayers, founders, finance teams, and return filers working through the transition from the Income Tax Act, 1961 to the Income-tax Act, 2025, as amended by Finance Act 2025. Read it as an educational readiness note. It does not promise a particular tax outcome, refund speed, or insulation from notices. Always verify your position against the official portal, notified forms, and your own records before filing.
What changed
A loss record is not simply a number from a previous year's computation. It needs to show the year in which the loss arose, the type of loss (capital, business, speculative, etc.), whether the original return was filed within the due date to preserve carry-forward eligibility, the amount carried forward from each prior year, the amount set off in subsequent years, and the balance remaining. Under the Income-tax Act, 2025, the concepts of set-off and carry-forward continue, but the law reference and form structure have changed.
| Point | Practical meaning |
|---|---|
| 1 | Loss carry-forward depends on the type of loss and filing discipline. |
| 2 | Old-period losses need return acknowledgements and schedules. |
| 3 | Set-off should be checked against current-year income heads. |
Why it matters now
The transition period is creating a year-selection problem across filings. AY 2026-27 return work, Tax Year 2026-27 current compliance, old notices, and newly notified forms can all require attention in the same month. For taxpayers with losses originating in earlier years under the Income Tax Act, 1961, the file needs to map those losses clearly into the current AY 2026-27 return without losing the old-law evidence trail.
A well-organised loss file should show the relevant period, the applicable law at the time the loss arose, the portal form used for the year the loss was first claimed, and the acknowledgement proving that the original return was submitted on time.
Practical example
A business loss from FY 2022-23 that was reported in the AY 2023-24 return can potentially be set off against business profits in AY 2026-27, provided the original return was filed by the applicable due date, the loss has not been exhausted against intervening years' income, and it is correctly disclosed in the current year's return schedule. To support that position, the taxpayer needs the original ITR acknowledgement, the computation showing the loss, the audit report if the taxpayer was required to get accounts audited, and the current-year working showing how much has been used and how much remains.
Do not assume the portal prefill carries this forward correctly. Cross-check against the actual acknowledgements and schedules.
Records to keep
- Earlier return acknowledgements for every year the loss was first reported
- Loss carry-forward schedules from those earlier returns
- Audit report (if applicable for those years)
- Current-year computation showing brought-forward loss, set-off against current income, and balance
Step-by-step checklist
- Identify whether loss carry-forward review affects AY 2026-27 filing, Tax Year 2026-27 compliance, or both.
- Read the official source and map the rule to your income head, taxpayer type, and dates.
- Collect source records, computation notes, challans, statements, and declarations before filing or payment.
- Check whether the position changes the ITR form, schedule, tax payment, TDS/TCS, or disclosure route.
- Preserve the final return, acknowledgement, e-verification proof, and supporting working papers.
Official sources
| Reference | Link |
|---|---|
| Income Tax Department - Set-off and carry forward of losses | Open source |
| Income Tax Department - Income-tax Act, 2025 PDF | Open source |
Common mistakes to avoid
- Using a form number that was applicable in an earlier year without checking what the current notified form requires for AY 2026-27.
- Mixing AY 2026-27 filing records with Tax Year 2026-27 payment or TDS records — they belong to different compliance layers.
- Treating a headline slab rate, rebate amount, or threshold as the final tax figure without running the computation.
- Filing before reconciling AIS, Form 26AS, challans, books, and certificates against each other.
- Discarding the official source reference and computation note that supported the carry-forward position in the first place.
How MyeCA helps
MyeCA helps taxpayers and businesses organise records, compare filing routes, build document checklists, identify tax-credit mismatches, and decide when a CA-led review is warranted before filing or responding to a department notice.
Final checklist
Confirm the assessment year. Read the applicable official source. Gather supporting records — earlier acknowledgements, loss schedules, current-year computation. Draft a short note explaining how much loss was brought forward, how much is being set off, and how much remains. Check whether the position affects the ITR form, schedule, or payment route. After submission, preserve the acknowledgement and e-verification proof in the same folder as the underlying documents.
Frequently asked questions
Is this carry-forward losses under the new Act guidance a substitute for filing advice?
No. It is an educational readiness note. Use the official portal and get case-specific CA review where facts, amounts, residency, or notices are complex.
Should I rely only on prefilled data?
No. Prefill is useful, but the return position should be matched with Form 16, AIS, Form 26AS, bank records, books, broker reports, challans, and working papers.
What should I preserve after taking a position?
Keep the official reference, computation note, supporting documents, portal acknowledgement, challans, and any professional review note in one folder.