Section 79 Loss Carry-Forward Calculator
Check if your startup can carry forward tax losses after a funding round — based on the 51% shareholding continuity rule under Section 79.
51% continuity maintained (100% at loss, 55% now)
51% continuity maintained (100% at loss, 55% now)
51% continuity maintained (72% at loss, 55% now)
Section 79, Income Tax Act 1961. DPIIT exemption per Finance Act 2019 amendment. Losses can be carried forward for up to 8 years. This tool covers business losses — unabsorbed depreciation is separately governed by Section 32(2). Consult your CA before a funding round.
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Frequently asked questions
What is Section 79 of the Income Tax Act?
Section 79 applies to closely-held companies (companies where shares are not substantially held by the public). It provides that losses of such a company cannot be carried forward if, at the end of the year in which the loss is to be set off, the beneficial ownership of shares carrying at least 51% of voting power is not held by the same persons who held it in the year the loss was incurred.
Does Section 79 apply to DPIIT-recognised startups?
No. DPIIT-recognised startups with a valid certificate are exempt from Section 79. The 2019 Finance Act amended Section 79 to allow startups to carry forward and set off losses even after a change in shareholding, subject to conditions — including that all shareholders holding voting power on the last day of the year in which the loss was incurred continue to hold shares, OR the startup has an 80IAC certificate.
How does a funding round affect loss carry-forward under Section 79?
In a priced equity round, existing shareholders get diluted. If the original shareholders (those who held shares in the loss year) now collectively hold less than 51% of voting power, Section 79 is triggered and the loss for that year cannot be carried forward. This is a critical issue in Series A/B rounds where founders get diluted below 51%.
What is the Section 79 exemption for startups under the Finance Act 2019?
From FY 2019-20, a recognised startup is exempt from Section 79 if: (1) it is recognised by DPIIT, and (2) all shareholders present in the year the loss was incurred continue to hold shares in the carry-forward year (regardless of percentage). This means new investors joining in later rounds do not disqualify the carry-forward — but original shareholders must not have exited.
What should a startup do before a funding round to protect loss carry-forward?
Before diluting below 51%, ensure: (1) obtain DPIIT recognition if not already done, (2) ensure all original shareholders retain at least 1 share in subsequent years, (3) document the shareholding pattern for each year a loss is incurred. Consult your CA before the round closes — Section 79 has no cure once the year-end passes with a non-compliant shareholding structure.