Question

What happens to credits in the carryback or carry over year?

Answer 1

ANSWER: An unused credit occurs when the carryovers and credit earned exceed than applicable tax liability limitation, the excess attributable to credit earned is termed unused credit. The section 46(b)(1) states that unused credit can be carried back and carried over. The unused credit – carry backs and carry over are taken into consideration while determining the amount of credit available and the credit allowed for the taxable years to which they can be carried. An unused credit is permitted for carry back to each of the 3 taxable years preceding the year of unused credit; and allowed for carryover to each of the 7 taxable years succeeding the year of unused credit.