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What is Speculative Business Loss
View AnswerAs 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
- Buy Share from B at 1000
- 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
Loss of Speculative Business can be adjusted against income from Speculation Business only (i.e. it cannot be adjusted against Normal Business)
- 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.
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 |
| 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
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 |
| 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
