30+ MCQ on Set off and Carry forward of Losses, Income Tax MCQs 2022 - 23, Master Chart [Free PDF]

MCQ on Set off and Carry forward of Losses
Including Master Chart to understand Set off and Carry Forward

In this page you get MCQ on Set off and Carry forward of Losses with answers which are asked in various exams of Mumbai University, Dibrugarh University, Gauhati University, Kolkata University and Assam University.

Also, these questions are useful for B. Com exams of various universities covered under CBCS pattern.

Also, these MCQ on Set off and Carry forward of Losses are also useful for NTA Net Commerce Exam, CMA, CA, CS and other competitive exams.

Introduction to Set off of losses

After computing the income under five heads one by one and after taking the clubbing of income under Sec.60 to 64, we have to aggregate all these incomes to get Gross Total Income. But before arriving at the gross total income, we have to adjust losses either in the same head or against other heads under Sec.70 to 80. 

First we have to set off the losses within the same head and if it cannot be adjusted, against income of other heads. The adjustment of losses from one head against the income, profits or gains of any other head of income during the same tax year is called set-off of losses.

Introduction to Carry forward of losses

Many times it may happen that after making intra-head and inter-head adjustments, still the loss remains unadjusted. Where the losses are not fully adjusted against the income of the same tax year and such losses are transferred to the next tax year, this process of transferring un- adjustable losses to the next year is known as carry-forward of losses. 

Income tax Multiple Choice Questions (MCQs) with answers
Assessment Year 2022 – 23 (Previous year 2021 – 22)

1. Loss from house property can be carried forward and set-off in subsequent eight assessment years:

a) If return of loss is filed within due date

b) Even if return of loss is filed after due date

c) Even if return of loss is not filed

d) None of above

Ans: b) Even if return of loss is filed after due date

2. When the assessee has loss from house property, the maximum amount of such loss eligible for set off against other permissible incomes would be:

a) Rs. 30,000

b) Rs.1,50,000

c) Rs.2,00,000

d) No Limit

Ans: c) Rs.2,00,000

3. STCL can be set off in the same assessment year from:

a) STCG.

b) LTCG.

c) both.

d) Not possible.

Ans: c) both.

4. Long term capital loss can be set off from which of the following?

a) STCG

b) LTCG

c) Casual Income

d) Profits and gains from business and profession

Ans: b) LTCG

5. Loss of card game can be set off from:

a) STCG

b) LTCG

c) Casual Income

d) None of the above (Casual loss Cannot be set off at all)

Ans: d) None of the above (Casual loss Cannot be set off at all)

6. Unabsorbed depreciation can be carried forward for:

a) Any number of years

b) 8 years

c) 4 years

d) 7 years

Ans: a) Any number of years

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7. Unabsorbed business losses cannot be carried forward for more than:

a) 5 A.Y

b) 6 A.Y

c) 8 A.Y

d) 10 A.Y

Ans: c) 8 A.Y

8. Loss from trading in derivatives through a recognised stock exchange can be carried forward for:

a) 8 years

b) 4 years

c) Unlimited years.

d) None of the above

Ans: a) 8 years

9. Capital expenditure on scientific research which cannot be absorbed on account of insufficiency of profit in any accounting year can be carried forward for:

a) 16.

b) 8.

c) indefinite.

d) 12.

Ans: c) indefinite.

10. Unabsorbed capital expenditure on scientific research can be carried forward for:

a) 15 years.

b) 14 years.

c) 8 years.

d) 10 years.

Ans: c) 8 years.

11. Unabsorbed depreciation can be carried forward for set off:

a) for a period of four years only.

b) for a period of eight years only.

c) for an unlimited number of years.

d) for a period of eighteen years only.

Ans: c) for an unlimited number of years.

12. Speculation Loss can be carried forward for:

a) 8 years.

b) 10 years.

c) 5 years.

d) 4 years.

Ans: d) 4 years.

13. Loss from specified business referred to in section 35AD can be set off from:

a) Any head of income other than salary

b) Income from Business or profession only

c) Capital Gains

d) Profit of any other specified business only

Ans: d) Profit of any other specified business only

14. Loss from specified business referred in sec 35AD can be carried forward for:

a) 8 years.

b) 10 years.

c) 5 years.

d) Indefinitely

Ans: d) Indefinitely

15. Loss from derivative trading in shares carried on in a recognised stock exchange can be set off:

a) From the income from speculative business only

b) From the income from non-speculative business only

c) From the income of both speculative and non-speculative business

d) Income from salary

Ans: c) From the income of both speculative and non-speculative business

16. Loss from derivative trading in shares can be carried forward for:

a) 8 years.

b) 10 years.

c) 5 years.

d) Indefinitely

Ans: a) 8 years.

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Fill in the blanks and True false type questions and answers

1. Loss from derivative trading in shares can be carried forward for 8 Years.

2. Loss of speculative business can be set off in the same assessment year from speculative business income.

3. Loss on account of owning and maintaining race horses can be carried forward for 4 (four) years and set off under the same head only.

4. Loss on account of owning and maintaining race horses can be set off under the same head only.

5. No loss can be set off from casual income.

6. Business loss cannot be set off from salary income.

7. Short-term capital loss on particular assessment year can be set off in the same assessment year from STCG and LTCG only.

8. Long term capital loss can be set off only from long term capital gains and not from any other income.

9. Loss under the head capital gain can be carried forward for 8 years (Both STCG and LTCG).

10. With effect from Assessment Year, 1999-2000 loss under the head house property can be carried forward for 8 succeeding previous years to be set off from income under the head house property only.         True

11. As per Section 73(1) of the Income Tax Act, the loss arising out of speculation business can be set off against profit from non-speculative business.                    False, Only speculative gain within 4 years

12. Short-term capital loss can be set off from either short-term capital gain or long-term capital gain.  True

13. Short-term capital loss can be set off from short-term as well as out of long-term capital gains.          True

14. The income earned from a smuggling business is taxable under the head of income from business and profession.         False, Loss of illegal business cannot be set off against legal business.

15. The business of purchase and sale of shares not to be treated as speculation business.          True

16. Stock-in-trade, raw materials, consumable stores held by the assessee for his business and profession is capital asset.            False

17. Unabsorbed depreciation which could not be set off in the same assessment year can be carried forward for 8 years.  False, carried forward till complete absorption and set off from any income

18. A business loss can be carried forward and set off in the subsequent assessment year whether the business on account of which this loss has arisen is continued or not.               True 

Also Read: Income Tax Chapterwise MCQs (2022 - 2023)

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3. 100+ MCQs on Income From Salary, Income Tax MCQs 2022 - 23 [Free PDF]

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5. 50+ Profits and Gains from Business and Profession (PGBP) MCQs, Income Tax MCQs 2022 - 23 [Free PDF]

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Master Chart of Set-off and Carry forward of Losses

Note:

1.    No deduction for expenses can be claimed against casual income

2.    For any loss to be carried forward and set-off against the income of a subsequent year the return of such loss must be filed under sec. 139. If no return is file for the year in which the loss was incurred, the right to carry forward the loss is lost.

3.    Order in which current and brought forward losses are to be adjusted:

a)    Current depreciation

b)    Capital expenditure on scientific research

c)    Current loss of another business

d)    Brought forward losses of earlier years (Oldest loss can be adjusted first)

e)    Brought forward unabsorbed depreciation

f)     Brought forward unabsorbed capital expenditure on scientific research.