• Proprietorship startup to salaried employee claiming loss

I was running a startup doing product development. I closed down my business as I got a good offer and my business was under loss. I have loans which I took while I was carrying on the business. I continue to pay back the loans as EMI from my salary eventhough Iam not making any money from the closed startup. 
Is it possible to claim the TDS deducted for the loss incurred ?
Asked 6 years ago in Income Tax

Your question is not very clear. Can you elaborate on which TDS are you referring to?

If you are referring to the TDS deducted when you were doing business, you can claim it when you file your return.

In case if you mean to adjust business losses with the salary income that you have now, it may not be permissible.

However Business losses can be carried forward and set off against any business profits that you may have in subsequent years.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

Please elaborate your question. The issue is whether can you set off losses or can you claim TDS deducted?

In any case would like to answer both the questions:

1) Loss of business cannot be taken and set off against salary income

2) TDS deducted of business should be claimed by filing the Income tax returns of the Business and claim refund of the said TDS Deducted

Warm Regards,

Karthik V Kulkarni, ACA

Karthik Kulkarni
CA, Bangalore
2 Answers
3 Consultations

5.0 on 5.0

Hi

If you mean to set off of business losses with salary income, it is not possible.

If you mean claiming TDS deducted while in business, you can claim it at the time of return filing.

Lakshita Bhandari
CA, Mumbai
5687 Answers
912 Consultations

5.0 on 5.0

You can very well claim the TDS deducted, but the business loss can not be setoff with salary income. It can be carried forward provided return is filled within due date and can be set iff with business income

Vidya Jain
CA, Kolkata
1012 Answers
58 Consultations

4.8 on 5.0

Hi,

There can be no loss that can be shown under the head Salaries.

However, you can claim the loss incurred in the business for carry forward provided you don't show it as a discontinued business.

Hence, you cannot claim the loss of business against salary income but only carry forward the same for any future set-off.

Regards,

Sunny Thakral
CA, Delhi
224 Answers
8 Consultations

5.0 on 5.0

Dear Sir,

While filing ITR, you need to disclose apart from salary income, income from business and pay the taxes accordingly.

You can claim the benefit TDS deducted from total tax liability on business income even though there is loss in the business.

Loss from business can not be set off with salary income.

Thanks

Vivek Kumar Arora
CA, Delhi
4863 Answers
1052 Consultations

5.0 on 5.0

I think you are missing something here. Why any TDS will be deducted on your loss??

Brijendra Tripathi
CA, Lucknow
143 Answers
3 Consultations

5.0 on 5.0

If you refer to TDS deducted from salary, you in any case would be claiming it from total income!

More details needed for further clarification.

Thanks

Siddharthh Jain
CA, Gurgaon
65 Answers
1 Consultation

5.0 on 5.0

Which tds deduction you are talking about ,is not clear here.

If you want to set off tds deducted on salary from business losses, its not permissible.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

1. Unfortunately, you will not be able to claim the EMI that you have been paying, as a deduction from your taxes from salary. Again to make you understand, Business losses cannot be set off with your salary income. Neither is there any provision where you can claim the repayment of business loans from your salary income.

2. No, that is not a valid declaration. you can claim business losses only if you have Business income. Your employer will give you Form 16 which will clearly state that you are the employee of the company. Similarly tax authorities have the data of your company as your TDS is being deposited by the company. Falsely declaring the source of income will not help you. Infact it may complicate things further.

Hope this clarifies. Let me know in case you have any further clarifications.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

Dear Sir,

You are still paying loan for the business in which there is no income. First of all, business is not closed because loan is still outstanding as an liability for the business for which repayment is being done by you. It is my advise to you to repay the business loan from the business bank account if any opened separately. As the repayment is being done from your salary account and not from your business income, business is still liable to repay you the same. After repayment of all business liabilities, set-off the remaining assets and liabilities and close the business.

1) Repayment of loan is not loss of the business it is an repayment of liability therefore you cannot set off of the salary income with the EMI. You are required to show salary income under the head Salary and business loss if any under the head Profit and Gains of Business or Profession. You cannot show salary income under other head. You can claim the TDS of Rs.18K deducted on your salary income from the total tax liability. Loss or Profit is calculated from the operating income and expenses of the business. In your case, it was development/manufacture of product or income from Android App and other routine expenses. Repayment of loan is not expense. Ineterest component in EMI is an expense.

2) As I told you earlier, business is not closed if there are Assets and liabilities outstanding in the books of accounts. In your annual Income tax return, you need to show Income and losses earned during the previous year. You need to disclose the salary income and business income or loss if any.

To close down the business, you need to surrender all the registrations etc.

Thanks

CA Vivek Arora

Vivek Kumar Arora
CA, Delhi
4863 Answers
1052 Consultations

5.0 on 5.0

As said earlier, you cannot set off business loss against salary income. You can claim the loss by filing your return with business income and also salary income. But as loss cannot be set off I dont think you will be getting any TDS refund. If any TDS has been deducted in business only that TDS will come as refund. Salary TDS which is being deducted will be adjusted against salary tax payable.

So most of the questions asked are answered in the negative.

Warm Regards,

Karthik V Kulkarni, ACA

Karthik Kulkarni
CA, Bangalore
2 Answers
3 Consultations

5.0 on 5.0

1. No, setting off business losses against salary income is not permissible.

2. Yes, show salary as well as business in your returns. Declare the losses in the returns so that they are carried forward and would be available to set off in future if there are any profits.

Lakshita Bhandari
CA, Mumbai
5687 Answers
912 Consultations

5.0 on 5.0

1) No, set-off of Loss from Business and Profession is not allowed from Income from Salaries.

However you can still show your Businesss loss in your Return and it can be Set-Off with any Capital Gain or Other sources of Income in the same year. IF NOT SET OFF COMPLETELY THEN CAN BE CARRIED FORWARD UPTO NEXT 8 YEARS AND WILL BE SET OFF WITH FUTURE BUSINESS INCOME.

2. No, salary can not be shown as other Income. Salary will be chargeable undrr the head Salaries only. HOWEVER, IF YOUR EMPLOUER AGREES THEN YOU CAN CONVINCE HIM TO CHARGE PROFESSIONAL FEES INSTEAD OF SALARY. THEN THIS WILL BE TREATED AS BUSINESS INCOME AND YOU WILL GET TO ADJUST YOUR LOSSES FROM THE BUSINESS INCOME.

Hope the above solves your queries!!!????

Brijendra Tripathi
CA, Lucknow
143 Answers
3 Consultations

5.0 on 5.0

1. EMI paid is not business exp only interest component will be business expense.

2.Business loss will not be set off against salary income .so you cannot claim losses of EMI Payment from salary.

3.You can not show salary as other income coz TDS is being deducted and it will be reflected on 26AS at income tax deducted from employer.

4. But if your employer permit, Draw professional fees instead of salary and show it as business and profession income and set off losses.Before doing these many points are to be considered and taken care of ,so take proper consultation.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

Hi,

Your answers are as below:

1) You cannot claim any loss arising from business as set-off from salary income. No set-off against salary income is allowed as per Income Tax Act. You can only set-off the same against business income only and in case there is no business income, you can carry forward the same for next 8 years for set-off against any business income in future, if any arises.

2) Yes, it is definitely possible. You have to file your income tax return in ITR-3 form to be able to carry forward such business loss as well as show salary income.

I hope your query is clear.

Regards,

Sunny Thakral
CA, Delhi
224 Answers
8 Consultations

5.0 on 5.0

No, your business loss cannot be set off against the TDS deducted on your Salary.

However, you should show loss in your return so that it can be claimed against future business income

Please feel free to call/ revert in case you need more clarity.

Thanks and regards

Abhishek Dugar

CA CS B.Com

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

You need to show income from salary and income from business/profession separately.

TDS will be claimed on salary and loss will be claimed in business which will be carried forward.

Priyank Kumar
CA, Agra
63 Answers

5.0 on 5.0

Hi,

In no case, can business loss be adjusted against salary income.

Regards,

Keerthiga Padmanabhan

M.Com., CA, LL.B

Keerthiga Padmanabhan
CA, Greater Mumbai
784 Answers
27 Consultations

5.0 on 5.0

Hello,

Business losses/ loan repayment expense cannot be adjusted against salary income in order to save up on taxes.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, FCA, LLB, CERT. FAFP

Rohit R Sharma
CA, Mumbai
2104 Answers
95 Consultations

5.0 on 5.0

Given the facts of the case,

1. In your come carry forward your business losses and setoff with its business income or other sources income (till eight year). Make sure to file return within due date to carry forward the losses

2. Loan interest payment will be business loss (as it has been taken for business purpose) and should not be setoff with salary inocme

3. Yes you can show as running business and salary incoem as income from salary.

Feel free in case you require further clarification

Vidya Jain
CA, Kolkata
1012 Answers
58 Consultations

4.8 on 5.0

Ask a Chartered Accountant

Get tax answers from top-rated CAs in 1 hour. It's quick, easy, and anonymous!
  Ask a CA