Yes, losses can also be clubbed under the Income Tax Act, 1961, in cases where income is required to be clubbed as per Section 64. This typically happens in situations where income from one person (such as a spouse, minor child, or specified relative) is added to another person’s income.

When Can Losses Be Clubbed?

1️⃣ Income from Transferred Assets (Section 64)

• If an individual transfers an asset (without adequate consideration) to their spouse or minor child, the income from that asset is clubbed with the individual’s income.
• If the asset generates a loss, that loss must also be clubbed in the same manner.

2️⃣ Minor Child’s Income (Section 64(1A))

• If a minor child earns income, it is generally clubbed with the parent’s income.
• If the child’s income results in a loss, that loss can also be clubbed with the parent’s income and set off accordingly.
• Exception: If the child has a disability under Section 80U, their income/loss is not clubbed.

3️⃣ Partnership Firm or HUF Cases

• If an individual transfers an asset to a partnership firm or HUF where they have a substantial interest, the profit/loss from that asset is clubbed with their income.

Example Scenario

🔹 A father gifts ₹5 lakh to his minor child, who invests it in stocks and incurs a loss of ₹50,000. Since the child’s income is clubbed with the parent’s income, the loss is also clubbed, and the parent can use it for set-off.

🔹 A husband transfers a property to his wife without consideration. If the wife incurs a rental loss, the husband must club that loss with his income.