Brought-forward Losses and Unabsorbed Depreciation: Building the ITR Working

Scope: FY 2025-26 / AY 2026-27 under the Income-tax Act, 1961; use the AY-specific notified return, schema and validation rules. Verification date: 11 October 2026.

Do not copy one net loss figure

A prior-year return may contain business losses, capital losses and unabsorbed depreciation with different set-off and carry-forward rules. Combining them into one opening amount makes it difficult to apply restrictions or identify expiry.

Build the working from filed returns, tax computations and relevant orders. A book accumulated-loss balance is not the same as a tax loss available for set-off. Keep the two reconciliations separate.

Create a year-wise tracker

Record origin AY, category, amount originally claimed, amount determined after relevant processing/assessment, prior utilisation, current opening, current set-off and closing balance. Add filing date, eligibility review and applicable expiry where relevant.

For ordinary non-speculative business losses, the old-Act framework generally allows an eight-assessment-year carry-forward subject to conditions. Unabsorbed depreciation follows a different framework and is not simply subject to that same eight-year limit. Special losses and exceptions require separate assessment.

A simplified working example

Assume a fictional company has eligible brought-forward ordinary business loss of ₹6 lakh and eligible unabsorbed depreciation of ₹3 lakh. Current business income after the relevant current-year computation is ₹8 lakh. Assuming the relevant conditions and set-off sequence are satisfied, the example uses ₹6 lakh of business loss and ₹2 lakh of unabsorbed depreciation.

This example isolates the tracking method. It does not override restrictions arising from the tax regime, ownership change, special income or other facts. Reperform the legal eligibility assessment before applying the numerical bridge.

Verify the opening against tax records

Compare the last return with processing or assessment records and earlier workings. Where a loss was reduced or previously utilised, update the tracker with the reference and reason. Preserve unresolved disputes separately rather than silently treating a disputed amount as unquestionably available.

Check whether a prior return was revised. The latest relevant filed and determined position can differ from the spreadsheet originally used by the preparer. Keep a version note so the reviewer understands which record supports the opening.

Review the conditions that can change utilisation

Confirm relevant filing requirements and due-date compliance for loss carry-forward, noting that unabsorbed depreciation has a different treatment. Closely held companies also need to assess ownership-change restrictions under Section 79 and applicable exceptions.

Review the effect of the chosen corporate tax regime and the nature of the loss. Do not assume that every balance remains usable after a regime option or reorganisation. Obtain a technical conclusion for material or unusual situations.

Agree the tracker with the return

1. Confirm origin year and category.
2. Verify current opening and eligibility.
3. Reperform utilisation against the relevant income.
4. Identify remaining balances and expiry where applicable.
5. Agree relevant ITR schedules with the approved tracker.

Keep MAT-related balances and any separate credit working distinct from ordinary income-tax losses. For assureOffice users, approved financials provide the book starting point; the tax-loss tracker remains a separate ITR working. This prevents a book loss or prior-year spreadsheet total from becoming an unsupported claim.

Show utilisation as a year-by-year movement

For each loss category and originating AY, show approved opening balance, adjustment from relevant orders, amount eligible for current utilisation, amount used and closing carry-forward. Keep amounts under dispute or awaiting evidence visible rather than mixing them with confirmed balances.

Reconcile the tracker to the final return schedules after the current computation is complete. If taxable income changes during review, revisit the utilisation order and closing balances. Retain the supporting return or order reference against each opening. This ensures that next year's preparer starts from a traceable tax record rather than an unexplained total copied from the accounts.

Related articles

• Tax Audit Depreciation Working: Reconciling Asset Blocks with the Fixed Asset Register
• ITR-6 Preparation Checklist: Documents and Workings to Collect First
• Normal Corporate Tax vs MAT: Understanding the Two Computations

Sources and references

• Income Tax Department — set-off and carry-forward of losses
• Income Tax Department — domestic companies, AY 2026-27
• CBDT Notification 49/2026 — ITR-6 for AY 2026-27