Losses in speculation business

Speculative loss: what is it?

A commercial transaction (i.e., the buying and selling of things) that is completed without regard for delivery of the items is referred to as a speculative transaction. Speculative loss is the loss resulting from a speculative commercial deal.

There are tax exemptions available under section 80g registration. Any loss calculated in relation to a speculation business operated by the assessee may only be offset by earnings and gains from other speculation businesses if any.

Subject to the other provisions of this Chapter, if for any evaluation year any loss computed in respect of a purely speculative business has not been fully set off under the above subsection, then the portion of the loss that has not been so set off, or the entire loss in cases where the assessee had no income from any other speculation business, shall be carried forward to the next assessment year, and:-

  (a) it will be deducted from any income and gains from any speculating business he conducted that are deductible for that evaluation year if any; and

  (b) if the loss cannot be fully offset in this manner, the remaining portion of the loss will be carried over to the subsequent assessment year, and so on.

The provisions of sub-section (2) of section 72 regarding allowance for depreciation or capital expenditure for scientific research must apply to speculative business in the same manner as they apply to any other business. Get benefits under 80g deduction.

In accordance with this rule, no loss may be carried over for more than eight evaluation years following the evaluation year for which it was initially estimated.

Speculative Losses may be carried over for a period of four years. In the four assessment years that immediately follow the assessment year for which the loss was initially estimated, such a loss may be carried forward. Although the assessee must remain the same, it is not required that the speculating business in which the loss was incurred continue to be operated in the year in which the assessee seeks to set off the loss.

If the requirements listed below are met, this provision is applicable:-

  (a) Assessee is an organisation.

  (b) It is not a corporation whose gross total revenue is mostly made up of income that is deductible as "Interest on Securities," "Income from House Property," "Capital Gains," and "Income from Other Sources."

  (c) The company's activity is the acquisition and disposal of stock in other businesses.

Know the good things about section 12a.