Use the correct loss compartment
For tax years beginning from 1 April 2026, section 114 of the Income-tax Act, 2025 permits a loss of the specified business referred to in section 46 to be set off only against profits of another specified business. Its carry-forward provision permits later use against profits of any specified business carried on by the assessee. It contains no numerical carry-forward year limit. Do not import the eight-year ordinary-business limit or four-year speculation limit into this provision.
Specified does not mean every capital-intensive activity
Section 46 defines the covered businesses and their conditions. Its list includes setting up and operating cold-chain facilities and agricultural-produce warehousing, alongside other specifically described activities. A company's internal “special project” label is insufficient. Establish the exact statutory category, commencement conditions, relevant approvals and applicable tax regime before classifying its loss. This article assumes legally established eligible specified businesses; it does not certify that a named project qualifies.
Separate the capital deduction from the loss utilisation
Section 46 addresses capital expenditure and contains exclusions and safeguards, including for land, goodwill and financial instruments, payment modes and double deductions. Section 114 governs the resulting loss compartment. An accounting loss is not automatically the correct tax loss. Reconcile the section 46 computation, other tax adjustments and book figures; do not claim depreciation again on expenditure already deducted contrary to the governing provisions.
Current-year and carried-forward claims have different evidence
For current losses, retain the computations of both specified-business streams. For brought-forward claims, section 121 requires the loss to have been determined pursuant to a return filed under section 263(1). Check the operative deadline, extensions and accepted filing evidence. A return acknowledgment alone does not prove that every amount entered was eligible or remained unutilised.
No fixed expiry is not unconditional entitlement
Maintain original year, determination, prior use and remaining balance even though section 114 does not state a numerical year cap. It does not permit set-off against unrelated salary, ordinary trading or investment income merely because those figures are positive. Identity changes, restructurings and other applicable restrictions require separate review. Pre-2026 losses need section 536 transition analysis rather than a new opening number inferred from the change in legislation.
Reconcile each business and each cohort
Allocate revenue, shared expenses and adjustments on a supported basis before calculating eligible profits. Avoid transferring ordinary-business costs into a specified activity to manufacture a restricted loss and then using it elsewhere. Preserve loss and depreciation schedules separately. All examples assume eligibility, correct classification and no separate disqualification; they calculate loss utilisation, not final tax, cess or surcharge.
Framework checked on 26 October 2026. Read the primary provisions.
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Current cross-business use
An established specified-business loss of ₹12,00,000 meets profit of another eligible specified business ₹7,00,000. Set-off is ₹7,00,000 and remaining loss ₹5,00,000, subject to carry-forward conditions.
Illustrative example 2: Ordinary profits stay outside
Specified-business loss ₹8,00,000 and ordinary trading profit ₹20,00,000 with no specified-business profit give section 114 set-off of ₹0 against that trading profit. Do not reduce it to ₹12,00,000 using this loss.
Illustrative example 3: Eligible opening balance
An eligible brought-forward balance ₹9,00,000 meets current specified-business profit ₹14,00,000. Use ₹9,00,000, leaving ₹5,00,000 profit and no balance of that cohort.
Illustrative example 4: More than eight years is not the sole rejection reason
Assume an independently confirmed qualifying ₹3,00,000 loss first computed in tax year 2026–27 remains available and unused. In the hypothetical ninth succeeding tax year 2035–36, ₹2,00,000 eligible specified-business profit uses ₹2,00,000, leaving ₹1,00,000. Section 114's text supplies no eight-year cutoff; all other eligibility assumptions still matter.
Illustrative example 5: Two profit streams
Eligible opening loss ₹10,00,000 meets eligible profits ₹3,00,000 and ₹4,00,000 from two specified businesses of the same assessee. Total use ₹7,00,000 leaves ₹3,00,000, assuming no other adjustment.
Illustrative example 6: Reconcile prior utilisation
Original eligible loss ₹15,00,000 less confirmed earlier use ₹6,00,000 leaves opening ₹9,00,000. Current eligible profit ₹5,00,000 leaves closing ₹4,00,000. Reusing the original ₹15,00,000 would ignore ₹6,00,000 already consumed.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the period | New tax year and legacy cohorts. |
| 2 | Prove section 46 status | Exact category and eligibility documents. |
| 3 | Review regime restrictions | Actual tax regime and governing conditions. |
| 4 | Reconcile tax loss | Books, capital deduction and adjustments. |
| 5 | Separate profit compartments | Specified versus unrelated income. |
| 6 | Verify original return | Deadline, extension and accepted filing. |
| 7 | Confirm determined balance | Assessment/intimation and previous claims. |
| 8 | Apply eligible utilisation | Same assessee and specified-business profits. |
| 9 | Review other restrictions | Restructuring, identity and transition. |
| 10 | Roll forward the register | Original amount, use and closing evidence. |
Sixteen practitioner FAQs
1. Does specified mean any special project?
No. Use section 46's statutory scope.
2. Are cold-chain activities mentioned?
The defined list includes the stated cold-chain business.
3. Does every warehouse qualify?
Establish the exact eligible activity and conditions.
4. Is a book loss the tax loss?
Reconcile statutory deductions and adjustments.
5. Can ordinary trading profit absorb this loss?
Not under section 114 merely because it is business income.
6. Can another specified business supply current profits?
Section 114 provides the stated cross-business set-off.
7. Can eligible old balances use later specified profits?
Yes, subject to the governing conditions.
8. Is the ordinary eight-year cap written into section 114?
No numerical carry-forward year limit appears there.
9. Does that remove the return condition?
No. Review section 121.
10. Does an old acknowledgment prove unused quantum?
Check determination and earlier utilisation too.
11. Can the same loss be used twice?
No. Reconcile each prior use.
12. Should depreciation be pooled into the loss?
Maintain the separate statutory schedules.
13. Can group entities pool their losses automatically?
The provision addresses the assessee's eligible businesses.
14. Does incorporation of a successor automatically transfer the balance?
Analyse the actual succession/restructuring provisions.
15. Does the new Act revive an ineligible old claim?
Apply section 536 and the original eligibility.
16. What closes the claim file?
Business eligibility, tax computation, return evidence and an unbroken roll-forward.
Conclusion
Section 114 confines a specified-business loss to specified-business profits. Unlike the neighbouring ordinary-business and speculation rules, it states no numerical carry-forward year limit. Confirm section 46 status, the return condition and surviving balances before claiming utilisation.