Hello,
Last financial year, I started my shop and had a net loss of 1.8 lakhs (due to initial investments). I declared that loss in Form 4 while filing IT returns.
This financial year, I have net profit of 2.10 Lakhs from the same shop. After adjusting against last year carry forward loss (1.8L), the net profit comes to Rs. 30,000 only, which means I dont have to pay any taxes this year (as this 30K is below 2L limit).
However, I am confused about what is the correct method for adjustment:
Case 1) Since this year, only 10,000 Rs. (above 2lakh tax free income slab) is my net taxable income. Should my last year loss of Rs. 1.8 Lakh be adjusted to Rs. 1.7 Lakh? (I will then declare this 1.7 as carry forward loss to next years)
OR
Case 2) 2.1 Lakh Profit this year minus 1.8 Lakh loss last year means simple 30K profit net. So all my carry forward losses ends here and I cannot carry forward anything to next years.
My doubt arises because 2 L Rs. is already exempted - shouldn't I get the benefit of this exemption?
Will appreciate your valuable inputs.
CAclubindia
