Section 110 of the Income-tax Act, 2025 — Carry Forward and Set Off of Loss from House Property

In plain language

What Section 110 says in plain English

Section 110 of the Income-tax Act, 2025 deals with one specific situation: you have a loss under the head "Income from house property" (most commonly because the home-loan interest you paid is more than the rent you earned), and that loss could not be fully adjusted against your other income in the same year. Section 110 lets you carry that leftover loss forward to future years and set it off — but only against future house property income.

This provision is the 2025 Act's replacement for Section 71B of the old Income-tax Act, 1961. The core rule is unchanged: unabsorbed house property loss can be carried forward for up to 8 tax years and can only be set off against income from house property in those later years.

The three-step logic of house property loss

• Step 1 — Same-head set-off: Loss from one house is first set off against income from another house you own in the same year.
• Step 2 — Inter-head set-off (Section 107 / 109): Any remaining house property loss is set off against income under other heads (salary, business, other sources) in the same year. This inter-head set-off is capped at ₹2,00,000 per year — the same cap that existed in the 1961 regime.
• Step 3 — Carry forward (Section 110): Whatever loss still remains after Steps 1 and 2 becomes the "unabsorbed loss from house property" and is carried forward under Section 110 to the next year, then set off only against house property income.

Who it applies to

• Anyone owning a let-out, deemed let-out or self-occupied property that generates a loss — typically salaried individuals and professionals paying home-loan interest.
• Individuals, HUFs, firms and companies — the head "Income from house property" applies across taxpayer types.
• It is most relevant to taxpayers whose annual home-loan interest exceeds their net rental income, or self-occupied owners whose ₹2 lakh interest deduction creates a loss.

Key conditions and limits under Section 110

• 8-year limit: The loss can be carried forward for a maximum of 8 tax years immediately following the year in which it was first computed. Any unabsorbed balance after 8 years simply lapses.
• Set-off only against house property income: In carry-forward years, the brought-forward loss cannot be adjusted against salary, business or capital gains — only against income from house property.
• Partial set-off allowed: If a future year's house property income is not enough to absorb the whole brought-forward loss, the balance rolls forward again (within the 8-year window).
• "Unabsorbed loss" defined: Section 110(3) defines it as the loss computed under "Income from house property" that has not been (or not wholly been) set off against other heads under Section 107 in the same year.

New tax regime and the ₹2 lakh cap

Under the default new tax regime (Section 115BAC-type regime carried into the 2025 Act), house property loss cannot be set off against other heads at all for a self-occupied property, and the ₹2 lakh set-off benefit is generally not available. The old-regime ₹2 lakh inter-head cap and Section 110 carry-forward mechanics matter most to taxpayers who opt out of the new regime. Always check which regime you are in before planning.

Transitional provision (important for 2026-27)

Losses under "Income from house property" that were brought forward from years before 1 April 2026 continue to be set off and carried forward under the 2025 Act in the same manner as Section 71B of the 1961 Act allowed. So your old unadjusted losses are not lost — they migrate into the new law with their remaining carry-forward period intact.

Practical implications

• File your return to preserve clarity, though house property loss carry forward has historically been allowed even with a belated return (unlike business/capital losses).
• Track each year's loss separately so you can respect the 8-year clock for each vintage.
• High-interest years on a let-out property can create large carry-forward losses that shelter future rental income — a real planning tool for landlords.