Amended and updated notes on section 78 of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to Carry forward and set off of losses in case of change in constitution of firm or on succession.
Chapter VI (Sections 66 to 80) of the Income Tax Act 1961 deals with the provisions related to aggregation of income and set off or carry forward of loss. Section 78 of IT Act 1961-2023 provides for Carry forward and set off of losses in case of change in constitution of firm or on succession.
Recently, we have discussed in detail section 75 (losses of firms) of IT Act 1961. Today, we learn the provisions of section 78 of Income-tax Act 1961. The amended provision of section 78 is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 78 of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section-78: Carry forward and set off of losses in case of change in constitution of firm or on succession
Section 78(1) of Income Tax Act
Where a change has occurred in the constitution of a firm, nothing in this Chapter shall entitle the firm to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner as exceeds his share of profits, if any, in the firm in respect of the previous year.
Section 78(2) of Income Tax Act
Where any person carrying on any business or profession has been succeeded in such capacity by another person otherwise than by inheritance, nothing in this Chapter shall entitle any person other than the person incurring the loss to have it carried forward and set off against his income.