What is Carry forward?

Learn carry forward with Drew Barrymore


Case Breakdown: Movie Ever after

Similar to the scene that you just saw, Drew Barrymore is carrying the prince forward, in accounts, balances are carried forward from one period to the next and in taxation un-adjusted losses can be carried forward to future years.

In accounting carry forward means carrying forward the balance of an account to the next period. For e.g. if the closing balance of the cash account in April 2021 is Rs. 25,000, then opening balance of cash for May 2021 would be Rs. 25,000 as it has been carried forward. In accounts we use terms such as balance b/d which means balance brought down and c/f which means carried forward. These are used in a ledger or T-accounts.


Before understanding what is carry forward, let’s understand what exactly is set-off.  In taxation, Set-off means adjusting losses with income or profit of that particular year. Losses that are not set-off are carried forward to successive years.

Under taxation, there are 5 heads of Income:

  • Income from Salary
  • Income from House Property
  • Income from Capital gains
  • Income from Business & Profession
  • Income from Other Sources

In taxation,  a set-off could be an intra-head or inter-head set-off.

Intra-head set-off

Loss from business 1 can be set-off from income of business 2, where 1 and 2 are the two sources of business.

There are come exceptions to this rule:

  • Losses from Speculative business can only be set-off from income from speculative business.
  • Loss from an activity of owning and maintaining race-horses will be set off only against the profit from an activity of owning and maintaining race-horses.
  • Long-term capital loss will only be adjusted towards long-term capital gains. However, a short-term capital loss can be set off against both long-term capital gains and short-term capital gain.
  • Losses from a specified business will be set off only against profit of specified businesses.

Inter head Set-off:

Under this set-off, taxpayers can set-off remaining losses against income from other heads. For e.g. loss from house property can be set-off against salary income.

Un-adjusted losses can be carried forward to future years for adjustments against income of these years. Set-off losses means adjusting the losses against the profit or income of that particular year.

After making these set-offs, there still could be un-adjusted losses that would be carried forward to future years for adjustment against income of those years.

Written by: Ms. Gitika Chandra


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