What happens when the company incurs a loss? How do companies profit from losses?

New Delhi. What does a company do if it has continuous losses? For how many years the company can carry forward its losses in its balance sheet. This question related to tax often comes up.

If a company is incurring loss due to depreciation, then the company can carry forward this loss for an indefinite period. But if the company incurs an expense loss, it can be adjusted for 8 years.

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This loss can be set-off in future years as per the provisions of the Income Tax Act, 1961. However, long-term capital loss can be adjusted only against long-term capital gains.


According to tax expert CA Alka Gupta, in some cases such as demerger, the company is also entitled to carry forward its loss in cases like the proprietorship of the firm. In order for the company to carry forward the loss in business, it is necessary to declare the loss before the due date. If the loss is declared after the due date, then the expense loss cannot be carried forward. In such cases only the benefit of depreciation loss will be available.

Tags: Company, profit and loss accounts

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