Section 112
Section 112: carry forward and set off of business loss
Section 112 deals with a loss under the head "Profits and gains of business or profession" (other than a speculation-business loss, which is covered separately) that could not be fully set off against income from other heads in the same tax year under Section 109. It lets the unabsorbed part of that loss be carried forward to future tax years and set off against business profits.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
What Section 112 says
Where a business loss for a tax year cannot be wholly set off against income under any other head as per Section 109, the loss not so set off (or the whole loss, as the case may be) is carried forward to the following tax year.
In the following tax year, the carried-forward loss is set off against the profits and gains of any business or profession carried on by the assessee that year. If it still cannot be wholly set off, the balance is carried forward again to the next tax year, and so on.
Eight-year time limit
A business loss cannot be carried forward under this section for more than eight tax years immediately succeeding the tax year in which the loss was first computed.
Interaction with unabsorbed allowances
Where any allowance (or part of it) under Section 33(11) or Section 45(7) is also to be carried forward, effect is first given to the provisions of Section 112 before those allowances are carried forward.
Frequently asked questions
For how many years can a business loss be carried forward under Section 112?
For a maximum of eight tax years immediately following the tax year in which the loss was first computed.
Can a carried-forward business loss be set off against salary income?
Section 112 only allows the carried-forward loss to be set off against profits and gains of a business or profession in the following tax year(s) - it does not extend to other heads of income.
Does Section 112 apply to speculation-business losses?
No - a loss from a speculation business is dealt with separately under Section 113, not under Section 112.
Related sections
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Plan your business loss carry-forward with our tax teamLast updated 9 September 2026