Section 108 of the Income-tax Act, 2025

Section 108 — Set off of losses under same head of income. Successor to s.70 of the 1961 Act.

Where this section sits

Section 108 is in Chapter VII — Set Off or Carry Forward and Set Off of Losses, which runs from section 108 to section 121.

← Section 107 · Section 109 →

What this section does

Sub-section (1) allows intra-head set off outside capital gains: unless the Act provides otherwise, where for any tax year the net result of computation from any source under any head of income other than "Capital gains" is a loss, the assessee may set that loss against his income from any other source under the same head for that year.

Sub-section (2) supplies the rule for capital gains, computed under sections 72 to 90. A loss on a short-term capital asset is set off against the income computed in respect of any other capital asset for that year, while a loss on a long-term capital asset is set off only against income computed in respect of any other long-term capital asset.

Why it is there

A head of income is a pool, and a source that loses money in a year should reduce what the same pool earns before tax is charged. The asymmetry in sub-section (2) preserves the different treatment given to long-term gains.

Who it applies to

Any assessee with a loss from one source and income from another source under the same head
An assessee with a short-term capital loss in the tax year
An assessee with a long-term capital loss in the tax year

What this means in practice

The set off runs one way only on the long-term side. A short-term capital loss goes against income computed in respect of any other capital asset — short-term or long-term — but a long-term capital loss is confined by sub-section (2)(b) to income computed in respect of another long-term capital asset. Sub-section (1) is expressly subordinate: it operates "unless provided otherwise in this Act". The section is about setting a loss against income of the same year under the same head; it says nothing about carry forward or about crossing heads.

An example

Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.

An individual has, in one tax year, a short-term capital loss of Rs. 6 lakh on shares and a long-term capital gain of Rs. 10 lakh on land. Under sub-section (2)(a) the short-term loss is set off against the long-term gain, leaving Rs. 4 lakh chargeable. Reverse the facts — a long-term loss of Rs. 6 lakh and a short-term gain of Rs. 10 lakh — and sub-section (2)(b) does not allow the set off, so the whole Rs. 10 lakh short-term gain remains chargeable for the year.

Where you meet this section

You meet it in the set-off schedule of the return and in a section 270(1) intimation that reverses a set off — most often one that has taken a long-term capital loss against a short-term gain.

The words themselves

any short-term capital asset is a loss, such loss shall be set off against the income, computed in respect of any other capital asset for that year

Section 108(2)(a), Income-tax Act, 2025.

any long-term capital asset is a loss, such loss shall be set off against the income computed in respect of any other long-term capital asset for that year

Section 108(2)(b), Income-tax Act, 2025.

What people get wrong

Setting a long-term capital loss against a short-term capital gain. Sub-section (2)(b) confines it to income computed in respect of another long-term capital asset.
Treating sub-section (1) as covering capital gains. It expressly excludes that head, which is governed by sub-section (2).
Reading sub-section (1) as unconditional. It applies "unless provided otherwise in this Act".
Using this section to set a loss against income under a different head. It permits set off only against income from another source under the same head.

What this replaced

The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.

70 - Set off of loss from one source against income from another source under the same head of income

See the full 1961 to 2025 concordance.

Circulars of the Board on this section

A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.

Circular No. 721 — Sections 112, 115A, 115AC, 115AD, 115B and 115BBA 1995-09-13
Circular No. 703 — Section 75 l Set-off of Losses of Firms 1995-04-18

See the circulars index.

Notifications that reach this section

A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance.

Notification No. SO 5194(E) — [फा. सं. 370149/170/2018-टीपीएल] 2018-10-09

See the notifications index.

Case law carried across

Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 108. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.

CIT v Yokogawa India Ltd Supreme CourtHelps taxpayertagged s.70
Must my 10A unit's profits be reduced by other units' losses before the deduction?

Explainers

Giving an asset away: s.47(iii), and what the 2024 amendment took out of it tagged s.70 (Act of 2025)
If I transfer an asset without any consideration, is there a capital gain?
Setting off and carrying forward losses tagged s.70
I made a loss this year. What can I set it against, and how long can I carry the rest forward?

Read with

Section 72
Section 90

What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.