## Intra-Head Set Off (Section 70) — General Rule and Exceptions

### General Rule

Losses under any head of income can be set off against income from the same head.

### Four Important Exceptions

Loss Type	Allowed Set Off
Speculative Business Loss	ONLY against Speculative Business Income
Specified Business Loss (Sec 35AD)	ONLY against Specified Business Income
Long Term Capital Loss (LTCL)	ONLY against LTCG (NOT STCG)
Loss from Owning & Maintaining Race Horses	ONLY against Income from Owning & Maintaining Race Horses

### Short-Term Capital Loss (STCL) Treatment

→ STCL can be set off against BOTH LTCG and STCG.

### Important Asymmetry — Normal Business Loss

Loss Type	Set Off Against
Specified Business Loss	Specified Business ONLY
Speculative Business Loss	Speculative Business ONLY
Normal Business Loss	Normal + Specified + Speculative Business Income :)

→ Normal business loss is the most flexible — it can offset specified and speculative income, but the reverse is NOT true.

Worked example

### Example 1

Example 1 — LTCL vs STCG:

Mr. A has:

LTCL: ₹2,00,000
STCG: ₹3,00,000
LTCG: ₹50,000

Analysis: LTCL can only set off against LTCG, not STCG.

LTCL ₹2L set off against LTCG ₹50K → ₹1,50,000 LTCL carried forward.
STCG ₹3L remains taxable in full.

Example 2 — Normal vs Speculative Business:

Mr. B has:

Normal Business Loss: ₹1,00,000
Speculative Business Income: ₹80,000
Specified Business Income: ₹50,000

Analysis: Normal business loss CAN be set off against speculative and specified income.

Set off ₹80K against speculative + ₹20K against specified.
Remaining ₹30K specified income is taxable.

Example 3 — Speculative Loss:

Mr. C has Speculative Loss ₹50,000 and Normal Business Income ₹2,00,000.

Analysis: Speculative Loss CANNOT be set off against normal business income — only against speculative income. → ₹50K carried forward; ₹2L fully taxable.

⚠️ Common exam mistakes

Setting off LTCL against STCG — NOT permitted; LTCL only against LTCG.
Setting off Speculative Loss against Normal Business Income — NOT allowed.
Forgetting the asymmetry: normal business loss CAN offset speculative income, but speculative loss CANNOT offset normal business income.
Allowing intra-head set off for race horse losses against other income from the racing industry — only owning & maintaining race horses income qualifies.

Bare-Act text Section 70 · Income-tax Act, 1961 · click to expand

Losses under any head of Income can be set off against same head. Exceptions: Speculative Business Loss - Only set off against Speculative Business Income. Specified Business Loss - Only set off against Specified Business Income ONLY. LTCL - Only set off against LTCG not STCG; STCL - Both LTCG & STCG. Loss from Owning and Maintaining Race Horses - Only set off against Income from Owning & Maintaining Race Horses.

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Intra-Head Set Off and Its Exceptions (Section 70)

Worked example

⚠️ Common exam mistakes