## Set Off & Carry Forward — Conceptual Overview

### Two Types of Set-Off

Type	Hindi Mnemonic	Meaning
Intra Head Adjustment	Apno se Madad Lena	Set off loss against income of the SAME head
Inter Head Adjustment	Dusro se Madad Lena	Set off loss against income of OTHER heads

### Sequential Flow of Set Off and Carry Forward

```

Loss Incurred in → Intra Head → Inter Head → Carry Fwd → In next PY,

the Previous Year Adjustment Adjustment to Next PY only Intra Head

Set off allowed

```

### CRITICAL Rule for Carried Forward Losses

→ INTER head adjustment is allowed ONLY in the CURRENT YEAR (Year of Loss).

→ Once a loss is carried forward, it can be set off only against INCOME OF THE SAME HEAD.

### Why This Matters

This is one of the most heavily tested distinctions. The 'year of loss' is special — only that year permits the cross-head safety net.

Worked example

### Example 1

Example — Following the Flow:

For PY 2024-25, Mr. X has:

Step 1 — Intra-head: No other HP income → no intra-head set off available.

Step 2 — Inter-head (current year): HP Loss of ₹5L can be set off against Business and Salary, BUT capped at ₹2L limit for HP.

Step 3 — Future years: In PY 2025-26 onwards, this ₹3,00,000 c/f can be set off ONLY against future HP income (not against Salary or Business).

⚠️ Common exam mistakes

Allowing inter-head set off in subsequent years for brought-forward losses — only intra-head is allowed thereafter.
Doing inter-head set off before intra-head — the sequence is fixed: intra → inter.
Setting off carried-forward HP loss against salary in the next year (only current-year HP loss has that flexibility, capped at ₹2 Lakh).

Reference: Sections 70, 71, 71B, 72, 73, 73A, 74, 74A — Income-tax Act, 1961

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Conceptual Overview - Intra Head & Inter Head Adjustments

Worked example