#### What is Speculative Business Loss

-a-

As per section 43(5) , speculative transaction means a transaction in which a contract which is ultimately settled ,otherwise than by the actual delivery.

For Example-

Mr A entered into contract with Mr B to purchase  shares at Rs 1000 after 3 months

After 3 month,price of share is 800.

Hence ,Mr A suffers loss of 200

Mr A now has 2 options

1. Buy Share from B at 1000
2. Handover 200 difference to B and not purchase the shares

1.Buy Share from B at 1000

,if Mr A still buys share at 1000,it is not a speculative business as there is actual delivery of shares

2.Handover 200 difference to B and not purchase the shares

i f Mr A  doesnt buy share but instead hand over 200 to Mr B,this is a speculative transaction loss because there is no delivery of shares

However,if it is done through  Stock Exchange and fulfills prescribed condition,it is a speculative loss as it is covered in exceptions as explained below

-ea-

• If any loss remaining it can be carry forward against income from Speculation Business
• Carry forward a llowed for 4 years maximum.

Loss of AY 2016-17 (FY 2015-16) can be carry forward till AY 2020-21 (FY 2019-20) maximum

• It is not necessary that same speculation business continues in the future period.

-ea-

QUESTION 1

What is the total income chargeable to tax for the A.Y.2016-17?

 Particulars Amount Loss from Speculative Business 1 -100000 Profit from Speculative Bsiness 2 30000 Profit from Normal Busines 3 80000 Total profit earned 10000

-a-

 PARTICULARS AMT PGBP Income Profit from Normal Busines 3 80000 Loss from Speculative Business 1 -100000 Add, Profit from Speculative Bsiness 2 30000 Balance Loss Carry forward to next year -70000 0 Total PGBP Income 80000 Gross Total income 80000

Speculative loss carry forwarded=70000

This can be carry forwarded till AY 2020-21

-ea-

QUESTION 2

Suppose next year(AY 2017-18),profit earned as follows

 Particulars Amount Loss from Speculative Business 1 -30000 Profit from Non Speculative Business 2 50000 Profit from Normal Busines 3 70000 Total profit earned 90000

-a-

 PARTICULARS AMT PGBP Income Profit from Normal Busines 3 70000 Loss from Speculative Business 1 -30000 Add, Profit from Speculative Bsiness 2 50000 Balance Profit 20000 Less Carry forward and Set off of Last year loss -70000 Balance Loss to be carry forward -50000 0 Total PGBP Income 70000 Gross Total income 70000

Remaining loss of 50000 of AY 2016-17 can be carry forward till AY 2020-21

1. Income Tax
2. Set off and Carry Forward of Losses
Set off and Carry Forward of Losses