What is loss
A situation in which a person's expenses exceed its revenues.
Set off of losses.
Set-Off means adjustment of certain losses against the income under other heads of income in the same assessment year.
Explanation:
It is quiet possible that a person may face a loss under any head of income(except salary) in a tax year. Loss of one head of income may be adjusted against other heads of income in the same year while calculating the taxable income of the person. Such adjustment is called set off losses.
Procedure for set off losses 56
(1) If a person sustains a loss for any tax year under any head of income , the person shall be entitled to set off the amount of loss against the person’s income under any other head of income for the year. But loss can not adjusted against income under the head salary or income from property.
If a person sustains a loss under the head “Income from Business” and also a loss under another head of income, the business loss shall be set off last.
56A. Set off of losses of companies operating hotels.
If a is company registered in Pakistan or Azad jammuon & Kashmir, operating hotels in Pakistan or AJ&K, sustains a loss in Pakistan or AJ&K for any tax year under the head “income from business” shall be entitled to set off the amount of the loss against the company’s income in Pakistan or AJ&K.
57A. Set off of business loss consequent to amalgamation.
The assessed loss (excluding capital loss) for current the tax year of the amalgamating companies shall be set off against business profits and gains of the amalgamated company, and vice versa.
58. Set off of speculation business losses.
When a person sustains a loss for a tax year in respect of a speculation business carried on by the person (hereinafter referred to as a “speculation loss”), the loss shall be set off only against the income of the person from any other speculation business of the person chargeable to tax for that year.
37A. LOSS ON SALE
Where a person sustains a loss on disposal of securities in a tax year, the loss shall be set off only against the gain of the person from any other securities chargeable to tax under this section and no loss shall be carried forward to the subsequent tax year.
59. Set off of capital losses.
Where a person sustains a loss for a tax year under the head “Capital Gains” the loss shall be set off only against the any other capital gains of the person chargeable to tax for that year.
[59AA. Group taxation.— (1) Holding companies and subsidiary companies of 100% owned group may opt to be taxed as one fiscal unit. If two or more companies are allowed for group taxation, the loss sustained by one company will be automatically set off against the profits and gains of other companies. Such option will not be available losses prior to formation of group.
[59B. Group relief.
(1) any company, being a subsidiary of a holding company, may surrender its assessed loss (excluding capital loss) for the tax year (other than brought forward losses and capital losses), in favour of its holding company or its subsidiary or between another subsidiary of the holding company:
(2) The loss surrendered by the subsidiary company may be claimed by the holding company or a subsidiary company for set off against its income under the head “Income from Business” in the tax year and the following two tax years subject to the following conditions, namely:—
93(2). Loss of an association of persons.
If an Association Of Persons sustains a loss during a tax year, it will be set off only against any other income of the AOP according to the general principle given in section 56.
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