Section 71B of ITA, 1961 : Section 71B: Carry Forward And Set Off Of Loss From House Property

Explanation using Example

Imagine Mr. Sharma owns a rental property that generates an annual income of ₹2,00,000. However, the interest he pays on the home loan for that property is ₹3,00,000 per year. This means he has a net loss of ₹1,00,000 under the head "Income from house property" for that assessment year.

During the same year, his income from other sources (like salary) is ₹5,00,000. According to the Income-tax Act, he can set off this loss against his other income. However, if he chooses not to, or if the loss is not completely set off, he can carry forward the unadjusted loss.

Under Section 71B, Mr. Sharma can carry forward the loss of ₹1,00,000 to the next assessment year and set it off against his future rental income. If he still cannot set off the entire loss in the next year, he can continue to carry it forward for up to eight assessment years until the loss is fully adjusted.