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Carry forward of business losses
(1) Where a person sustains a loss for a tax year under the head Income from Business (other than a loss to which sub-section (4) or section 58 applies) and the loss cannot be wholly set off under section 56, so much of the loss that has not been set off shall be carried forward to the following tax year and set off against the person’s income chargeable under the head Income from Business for that year.
(2) If a loss sustained by a person for a tax year under the head Income from Business is not wholly set off under sub-section (1), then the amount of the loss not set off shall be carried forward to the following tax year and applied as specified in sub-section (1) in that year, and so on, but no loss can be carried forward to more than six tax years immediately succeeding the tax year for which the loss was first computed.
(2A) Where a loss, referred to in sub-section (2), relating to any assessment year commencing on or after 1 day of July, 1995, and ending on the 30 day of June 2001, is sustained by a banking company wholly owned by the Federal Government as on first day of June, 2002, which is approved by the State Bank of Pakistan for the purpose of this sub-section, the said loss shall be carried forward for a period of ten years.
(2B) Where a loss, referred to in sub-section (2), relating to a tax year commencing on or after the first day of July, 2020 is sustained by a resident company engaged in the hotel business in Pakistan, the said loss shall be carried forward for a period of eight years.
(2C) Where a loss, referred to in sub-section (2), relating to a tax year commencing on or after the first day of January, 2017 is sustained by Pakistan International Airlines Corporation Limited, the said loss shall be carried forward for a period of ten years.
(3) Where a person has a loss carried forward under this section for more than one tax year, the loss of the earliest tax year shall be set off first. (4)The loss attributable to deductions allowed under sections 22, 23, 23B and 24 that has not been set off against income, the loss not set off shall be set off against fifty percent of the person's balance income chargeable under the head "income from business" after setting off loss under sub-section (1), in the following tax year and so on until completely set off:
Provided that such loss shall be set off against hundred percent of the said balance income if the taxable income for the year is less than ten million Rupees.
(5) In determining whether a person’s deductions under sections 22, 23, 23B and 24 have been set off against income, the deductions allowed under those sections shall be taken into account last.
(2) If a loss sustained by a person for a tax year under the head Income from Business is not wholly set off under sub-section (1), then the amount of the loss not set off shall be carried forward to the following tax year and applied as specified in sub-section (1) in that year, and so on, but no loss can be carried forward to more than six tax years immediately succeeding the tax year for which the loss was first computed.
(2A) Where a loss, referred to in sub-section (2), relating to any assessment year commencing on or after 1 day of July, 1995, and ending on the 30 day of June 2001, is sustained by a banking company wholly owned by the Federal Government as on first day of June, 2002, which is approved by the State Bank of Pakistan for the purpose of this sub-section, the said loss shall be carried forward for a period of ten years.
(2B) Where a loss, referred to in sub-section (2), relating to a tax year commencing on or after the first day of July, 2020 is sustained by a resident company engaged in the hotel business in Pakistan, the said loss shall be carried forward for a period of eight years.
(2C) Where a loss, referred to in sub-section (2), relating to a tax year commencing on or after the first day of January, 2017 is sustained by Pakistan International Airlines Corporation Limited, the said loss shall be carried forward for a period of ten years.
(3) Where a person has a loss carried forward under this section for more than one tax year, the loss of the earliest tax year shall be set off first. (4)The loss attributable to deductions allowed under sections 22, 23, 23B and 24 that has not been set off against income, the loss not set off shall be set off against fifty percent of the person's balance income chargeable under the head "income from business" after setting off loss under sub-section (1), in the following tax year and so on until completely set off:
Provided that such loss shall be set off against hundred percent of the said balance income if the taxable income for the year is less than ten million Rupees.
(5) In determining whether a person’s deductions under sections 22, 23, 23B and 24 have been set off against income, the deductions allowed under those sections shall be taken into account last.
Amendment history (21)
- Inserted by the Finance Act, 2013.
- The words “or income from property” omitted by the Finance Act, 2021.
- Full stop substituted with a colon and thereafter a new proviso added by the Finance Act, 2025.
- Inserted by the Finance Act, 2002
- Inserted by the Finance Act, 2007.
- The word “company” substituted by the Finance Act, 2019.
- After word “Pakistan” the expression “, Gilgit-Baltistan” inserted by the Finance Act, 2019.
- The word “onward” substituted by the word “onward” by the Finance Act, 2014.
- Inserted by the Finance Act, 2018.
- Inserted by the Finance Act, 2002.
- New sub-section (2B) inserted through Finance Act, 2020 dated 30 June, 2020
- Sub-section (2C) inserted by the Finance Act, 2024.
- Sub Section (4) substituted by the finance Act 2018,the substituted subsection (4) is
- The expression “23A” omitted by the Finance Act, 2021. Earlier this omission was made through
- Inserted by the Finance Act, 2009.
- The expression “23A” omitted by the Finance Act, 2021. Earlier this omission was made through Tax
- Added by the Finance Act, 2002.
- Sub-section (1) substituted by the Finance Act, 2007. The substituted sub-section (1)
- Inserted by the Finance Act, 2005.
- Full stop substituted by the Finance Act, 2005.
- Inserted by the Finance Act, 2008.
Amendment notes captured from the source page(s); they may include changes to neighbouring provisions.
Source FBR PDF page 109
Unofficial reference, compiled from the FBR’s consolidated Income Tax Ordinance 2001 (amended up to 30 June 2026). Provided for general information only — not an official FBR publication and not legal or tax advice. Always verify against the official FBR text before relying on it for filing or any decision.