The carry forward of losses under Income-tax Act, 2025 is an important transitional provision that ensures continuity for taxpayers shifting from the Income-tax Act, 1961 to the new regime. The law clearly allows losses incurred before 1 April 2026 under the old Act to be carried forward and set off under the new Act. This is provided through Section 536, which preserves existing rights while maintaining earlier conditions.
However, it is crucial to understand that this is not a fresh benefit. The new Act follows a continuity-based approach, meaning that all original conditions under the 1961 Act continue to apply. The most important aspect is that the time limits for carrying forward losses do not reset. Business losses can still be carried forward for eight assessment years, speculation losses for four years, and capital losses as per existing rules. Unabsorbed depreciation continues to enjoy unlimited carry forward. The counting of these periods starts from the year in which the loss was originally incurred and does not restart under the new law.
Another critical condition is timely filing of returns. As per the earlier provisions, losses can only be carried forward if the return of income was filed within the due date under Section 139(3). This condition remains unchanged. If a taxpayer failed to file the return on time, the loss cannot be carried forward, and the Income-tax Act, 2025 does not provide any relief to revive such losses. This highlights the importance of compliance in earlier years.
The new Act also does not introduce any additional benefits or relaxations. It does not extend carry forward periods, allow previously disallowed losses, or override past non-compliance. Its purpose is to simplify the structure of tax laws while preserving the integrity of existing provisions.
In practical terms, taxpayers should treat this transition as a continuation of the old system. Proper tracking of loss years, timely filing of returns, and careful tax planning remain essential to fully utilize the available benefits.
Conclusion:
The carry forward of losses under Income-tax Act, 2025 ensures that valid losses from the earlier regime continue to be available, but strictly under the same conditions and timelines. There is no reset, no additional relief, and no correction of past mistakes. Taxpayers who have complied with the rules can continue to benefit, while those who have not cannot rely on the new law for any relaxation.