Direct answer
Bring earlier ordinary business losses and unabsorbed depreciation into separate schedules, with separate entitlement checks. Section 72 business loss generally has an eight-assessment-year period and can meet eligible business income; section 32(2) depreciation has a distinct carry-forward mechanism without that general eight-year limit. Section 72(2) gives the business-loss use priority over the brought-forward depreciation allowance. Current depreciation belongs in the current BP calculation before this earlier-year bridge. Income-tax Act, 1961 as amended by Finance Act, 2026: sections 32(2), 72, 79, 80 and 115BAA.
Use the actual opening entitlement
For AY 2026–27, reconcile filed returns, processing intimations, assessment/appeal/rectification orders and intervening-year uses. A prior computation is evidence of a claim, not automatically proof of the finally available amount. Keep disputed amounts and pending orders visible. Reconcile the financial-statement deferred-tax asset separately: its recognition neither creates nor measures the statutory loss pool. This guide applies the 1961 Act to FY 2025–26 and uses the official form/schema/validations checked on 27 October 2026.
Expiry and eligibility come before utilisation
Record the AY in which each ordinary business loss was first computed and its last available assessment year under the applicable provision. For the ordinary eight-year rule, an AY 2018–19 loss reaches its eighth succeeding year in AY 2026–27. An AY 2017–18 ordinary loss is outside that general period in this return. Reorganisations, special provisions and relief orders need their own analysis; do not apply these simple examples to transferred losses without it. Prefer a documented oldest-expiring-first review control within eligible pools, without claiming that a spreadsheet policy overrides law.
Company shareholding and regime screens
For a company within section 79, analyse the relevant beneficial voting-power continuity test and statutory exceptions using loss-year and current-year evidence. Do not rely only on the count of shares issued in the current year. Screen losses and depreciation attributable to deductions barred under section 115BAA separately: that regime does not extinguish every ordinary loss or every depreciation balance. A section 79 loss conclusion should not simply be copied onto UD without examining section 32(2) and the nature of the balance.
Exact form links
BFLA column 1 takes post-CYLA income; column 2 applies the relevant earlier losses; column 3 applies brought-forward depreciation; column 4 applies the section 35(4) allowance; column 5 is the balance. BFLA row ii is ordinary business. Validation rule 538 ties its column 1 to CYLA 5iii. Rule 536 ties BFLA column 3 total to UD column 4 utilisation. Rule 535 similarly links section 35(4) use to UD column 7. The UD schema separately contains amounts adjusted on opting for section 115BAA; do not relabel those as current consumption.
Closing pools and current-year additions
For each vintage, reconcile opening amount, legally required adjustment, current use and closing entitlement. CFL retains year-wise business and other loss categories; UD retains depreciation and the specified allowance. The form’s current-year loss and earlier-year closing-loss entries are different. Part B-TI row 8 captures the relevant earlier-year loss/depreciation set-off, while current-year losses to carry forward are separately summarised in row 17. Never carry the opening loss forward in full after also using it in BFLA.
Scope of the illustrations
All models assume verified current-year depreciation has already been reflected in BP, no disputed ownership of the loss, no special presumptive-income restriction, no business reorganisation and independently established prior filing entitlement. Normal-rate interest is used where stated; salary, lottery, VDA, restricted deemed income and other specially barred items are excluded. No final corporate-tax liability is calculated.
Applicable primary references
Income-tax Act, 1961 as amended by Finance Act, 2026: sections 32(2), 72, 79, 80 and 115BAA Notified AY 2026–27 ITR-6: BFLA, CFL, UD and Part B-TI AY 2026–27 validation rules: BFLA/CFL/UD link checks, including rules 535–538 AY 2026–27 schema: separate ITRScheduleUD and loss-vintage structures
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Loss before brought-forward depreciation
Post-CYLA ordinary business income is ₹10,00,000. Eligible earlier ordinary business loss is ₹7,00,000 and unabsorbed depreciation ₹5,00,000. BFLA uses business loss ₹7,00,000 first and depreciation ₹3,00,000 next, leaving nil income, nil ordinary loss and UD closing ₹2,00,000. Do not consume depreciation first and unnecessarily leave a time-limited loss unused.
Illustrative example 2: Interest does not absorb earlier ordinary business loss
Post-CYLA ordinary business income is ₹3,00,000 and normal bank interest ₹2,00,000. Eligible earlier business loss is ₹5,00,000, with no UD. Use ₹3,00,000 against business, leaving ordinary loss ₹2,00,000 and taxable normal interest ₹2,00,000. Treating the ₹5,00,000 as a current-year loss would incorrectly erase the interest.
Illustrative example 3: Depreciation can need a different matching analysis
Post-CYLA ordinary business income is ₹3,00,000 and eligible normal interest ₹2,00,000. Earlier business loss ₹3,00,000 absorbs business income. Eligible UD ₹4,00,000 then absorbs the ₹2,00,000 normal interest in this uncomplicated section 32(2) model. Closing UD is ₹2,00,000 and normal income nil. The result differs from the prior example because UD is not the same pool as ordinary business loss.
Illustrative example 4: Check the last available year
The company has an ordinary AY 2018–19 loss ₹4,00,000 and an AY 2020–21 loss ₹3,00,000, both otherwise eligible. Against AY 2026–27 business income ₹5,00,000, this model uses the older ₹4,00,000 and ₹1,00,000 of the newer pool. Remaining AY 2020–21 loss is ₹2,00,000. The older loss is in its eighth succeeding AY; this example assumes no special extension or transferred-loss rule.
Illustrative example 5: Reconcile an order instead of importing the old claim
A prior filed return claimed loss ₹9,00,000. A binding order for the model determines the available loss at ₹7,50,000, and intervening permitted uses total ₹2,00,000. Current opening entitlement is ₹5,50,000. Against eligible current business income ₹4,00,000, use ₹4,00,000 and carry the eligible ₹1,50,000 balance. Importing the original ₹9,00,000 would overstate the opening pool by ₹3,50,000.
Illustrative example 6: Separate a regime-related adjustment from use
Opening UD is ₹10,00,000, of which ₹2,00,000 is established as attributable to a deduction barred by the company’s valid section 115BAA option and ₹8,00,000 is otherwise eligible. Eligible current use is ₹5,00,000. UD closes at ₹3,00,000 after showing the separate ₹2,00,000 regime adjustment and ₹5,00,000 use. Do not carry ₹5,00,000 forward or describe all ₹10,00,000 as lost under the option.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify each loss/allowance vintage | AY-wise opening register and legal category. |
| 2 | Reconcile filed and determined amounts | Returns, intimations, orders and pending dispute notes. |
| 3 | Remove intervening uses | Prior-year BFLA/CFL/UD and processed computation trail. |
| 4 | Check ordinary-loss expiry | First-computed AY and last succeeding eligible AY. |
| 5 | Screen company restrictions | Section 79 evidence, exceptions and regime-attribution analysis. |
| 6 | Confirm current depreciation is already in BP | DEP-to-BP bridge and no duplicate allowance. |
| 7 | Apply post-CYLA BFLA priority | Separate columns for business loss, UD and section 35(4). |
| 8 | Reconcile utilisation across schedules | BFLA totals to CFL and UD source columns. |
| 9 | Calculate closing entitlement | Opening less adjustments less use, by vintage/category. |
| 10 | Tie Part B-TI and preserve evidence | Row 8 reconciliation, current/earlier distinction and final review sign-off. |
Sixteen practitioner FAQs
1. Is the prior return’s CFL automatically the opening balance?
Reconcile later orders and intervening uses before accepting it as the available entitlement.
2. Does a deferred-tax asset establish the loss claim?
No. Financial-reporting recognition and statutory carry-forward eligibility are separate analyses.
3. Which pool generally has the eight-year limit?
Ordinary business loss under section 72, subject to applicable special provisions.
4. Does UD share that same general limit?
Section 32(2) provides a distinct mechanism; do not impose the ordinary-loss eight-year limit mechanically.
5. Which earlier pool receives priority?
Section 72(2) requires effect to ordinary business-loss set-off before the specified brought-forward allowances.
6. Is current depreciation part of that earlier-pool priority?
Compute current depreciation in the current BP result first, then deal with the earlier-year pools.
7. Can earlier ordinary business loss meet normal bank interest?
It is generally confined to business income; the interest-only balance in example two remains outside that matching pool.
8. Can UD have a broader matching result?
Yes, subject to section 32(2), ordering and applicable restrictions. Do not assume it is identical to section 72 loss.
9. Why is AY 2018–19 important in this return?
Its eighth succeeding AY under the general ordinary-loss rule is AY 2026–27.
10. Can an expired ordinary loss be retained because software accepts it?
A cell or successful upload cannot extend statutory eligibility.
11. Does every private-company ownership change destroy every pool?
Analyse section 79’s applicability, voting-power facts and exceptions, then examine each balance’s legal character.
12. Does section 115BAA eliminate all UD?
Identify attribution to the barred deductions. Preserve independently eligible balances rather than making a blanket adjustment.
13. Where is ordinary business shown in BFLA?
Row ii, fed from the specified post-CYLA ordinary-business income.
14. Where should BFLA depreciation use agree?
The validation links its column 3 total to utilisation in UD column 4.
15. Can a current-year loss be added to an old vintage?
Keep its current-year identity and applicable filing/expiry evidence instead of moving it into a convenient older row.
16. What is the final control equation?
Opening entitlement, separately identified legal adjustments, current use and closing entitlement must reconcile by vintage and pool.
Conclusion
Reconcile company loss vintages and unabsorbed depreciation to BFLA, CFL and UD, checking priority, expiry, shareholding and regime-attribution restrictions.