Business Profit first need to be setoff against business loss or depreciation?
One client has some business profit this year. However, he had business loss last year. This year we have business loss brought forward and also depreciation brought forward.
My question is should i first adjust the business loss or depreciation with current year's profit?
As per provisions of income tax act, Business Losses can be carried forwarded upto 8 years, however for unabsorbed depreciation no time limit is fixed.
You should first adjust your currernt year profits with Business Loss brought forward (Section 72(1)) and than with Unabsorbed Depreciation (32(2)).
Business Loss can be carried forward & set off only against Business Profits. The carry forward is allowed up to 8 years. The unabsorbed depreciation can be carried forward for any no of years.