Answer the set-off question before entering a negative figure
For AY 2026–27, a company must classify each current loss before using the CYLA schedule. Ordinary business loss, house-property loss, capital loss and ring-fenced activity losses do not share one unrestricted pool. Complete eligible intra-head adjustments first, apply permitted inter-head adjustments, then test whether the remaining loss can be carried forward. CYLA is the current-year bridge; BFLA is for earlier-year pools. A loss in the financial statements is not itself the tax loss to enter. Notified AY 2026–27 ITR-6: BP, CYLA, BFLA, CFL and Part B-TI.
Applicable law and form
This article applies the Income-tax Act, 1961 to FY 2025–26, using the notified AY 2026–27 ITR-6, its schema and validation rules checked on 27 October 2026. Relevant provisions include sections 70, 71, 71B, 72, 73, 73A, 74, 79A, 80 and 115BBE, read with the applicable regime. Do not import the individual section 115BAC regime into a company’s loss calculation. A company opting for section 115BAA needs the attribution-based adjustments under that section rather than an unsupported statement that every loss disappears.
Normal business and house-property pools
An eligible current ordinary business loss can generally be adjusted against other eligible heads, unlike an ordinary brought-forward business loss that is confined to business income. First calculate the business result after tax depreciation and all proper BP adjustments. For current house-property loss, section 71(3A) limits inter-head set-off to ₹2 lakh; the balance requires the separate section 71B carry-forward working. Do not apply the ₹2 lakh cap to eligible intra-head property adjustments as though it capped every property loss entry.
Capital and restricted activity losses
A short-term capital loss can be adjusted against eligible short- or long-term capital gains; a long-term capital loss is confined to eligible long-term gains. Net capital loss does not reduce business profit or normal interest income. Speculation and section 35AD specified-business losses require their own permitted matching pools. Ordinary business loss is a different category: do not confuse a loss from a ring-fenced activity with an ordinary loss merely because both appear in Schedule BP. Determine the legal activity classification independently, including company-specific speculation provisions where relevant.
Exact AY 2026–27 schedule route
CYLA column 1 is income after intra-head set-off; columns 2, 3 and 4 address the stated current-year house-property, business and other-sources loss adjustments; column 5 is the remaining income. Row iii is ordinary business income and row xiii normal other-sources income. Current ordinary-business loss reaches the CYLA pool through BP item E, with validation rule 501 tying CYLA 3i to BP E 2vi. Rule 502 limits CYLA 2xvi to ₹2 lakh. Rules 506–508 reconcile the remaining loss pools in row xvii; rule 509 checks column 5 as column 1 less columns 2–4. Preserve the label and source, not just the row number.
Closing losses are not all held in CYLA
Capital and special-activity losses retain their own upstream schedules and CFL classifications. Reconcile eligible current-year losses into CFL, where xxi is current-year losses to be carried forward after the specified investment-fund distribution adjustment, if any. Part B-TI row 17 summarises current-year losses carried forward, while rows 6 and 7 reflect current-year set-off and the post-set-off income balance. These values are not interchangeable. The company examples exclude investment funds and special presumptive income.
Restrictions, evidence and mistakes
Before allocating losses against income under sections 68–69D or search/survey undisclosed income, review the specific section 115BBE and 79A restrictions rather than relying on the general CYLA mechanics. Do not set losses from exempt sources against taxable income. Timely filing under sections 139(3) and 80 matters for specified carry-forwards even where current-year set-off is otherwise available. Nil normal income also leaves the independent MAT review intact. All examples below assume ordinary domestic-company facts, no regime-related disallowance unless stated, independently verified income classification and timely loss filing where carry-forward is illustrated; they do not compute final tax.
Applicable primary references
Notified AY 2026–27 ITR-6: BP, CYLA, BFLA, CFL and Part B-TI Official AY 2026–27 validation rules 501–527 and related schedule checks Income-tax Act, 1961 as amended by Finance Act, 2026: sections 70–80, 115BBE and corporate regimes
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Ordinary business loss against normal interest
A company has an eligible current ordinary business loss ₹12,00,000 and normal taxable bank interest ₹5,00,000. With no special restriction, CYLA uses ₹5,00,000 of the business loss against interest. Normal income after this set-off is nil and business loss remaining is ₹7,00,000, subject to carry-forward conditions. Do not carry the original ₹12,00,000 forward after also claiming the ₹5,00,000 use.
Illustrative example 2: House-property inter-head ceiling
After eligible property-head computation, current house-property loss is ₹6,00,000 and ordinary business income ₹9,00,000. Inter-head set-off is limited to ₹2,00,000, leaving business income ₹7,00,000 and property loss ₹4,00,000 for the section 71B carry-forward working. The current limit is not permission to deduct ₹6,00,000 in CYLA.
Illustrative example 3: Short-term capital loss cannot consume business profit
Short-term capital loss is ₹4,00,000, eligible long-term capital gain ₹2,50,000 and ordinary business profit ₹6,00,000. Capital-head adjustment uses ₹2,50,000, leaving short-term capital loss ₹1,50,000. The ₹6,00,000 business profit remains unaffected by that capital loss. Confirm the special-rate capital-gains schedule independently.
Illustrative example 4: Long-term loss is not a short-term deduction
The company has long-term capital loss ₹3,00,000 and short-term capital gain ₹2,00,000, with no long-term gain. The eligible current capital-loss set-off in this model is ₹0; the short-term gain remains ₹2,00,000 and the long-term loss pool remains ₹3,00,000 for its separate carry-forward review. A net spreadsheet total of minus ₹1,00,000 would hide the prohibited matching.
Illustrative example 5: Speculation loss remains ring-fenced
A company has a legally classified speculation loss ₹2,00,000, speculation profit from another eligible source ₹80,000 and ordinary operating profit ₹5,00,000. Speculation-head matching absorbs ₹80,000, leaving speculation loss ₹1,20,000. It does not reduce the ₹5,00,000 ordinary profit. The model assumes the activity classification has already been established.
Illustrative example 6: Restricted deemed income needs a separate screen
An ordinary current business loss is ₹4,00,000. Separately, ₹6,00,000 is taxable under section 68 and covered by section 115BBE(2). The business loss cannot reduce that amount: restricted income remains ₹6,00,000 and the ₹4,00,000 loss is reviewed separately for carry-forward. Do not place the restricted income into an unrestricted normal-income CYLA pool.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm AY and corporate regime | AY 2026–27 form and any section 115BAA/115BAB attribution review. |
| 2 | Compute tax results by source | Signed accounts, BP bridge and head-wise schedules. |
| 3 | Classify each loss | Ordinary business, property, capital or ring-fenced activity memorandum. |
| 4 | Perform eligible intra-head adjustments | Source-to-head reconciliation and capital-loss matching. |
| 5 | Screen restricted income | Sections 115BBE/79A and exempt-source checks. |
| 6 | Populate the CYLA source pools | BP E, HP and OS source links with the correct labels. |
| 7 | Apply inter-head limits | Property ₹2 lakh ceiling and permitted business-loss allocation. |
| 8 | Reconcile CYLA remaining income/loss | Columns 1–5 and row xvii formula checks. |
| 9 | Carry eligible residuals into CFL | Head/type-wise pool, filing entitlement and current-year closing amount. |
| 10 | Tie Part B-TI and retain MAT review | Rows 6/7/17, final normal income and separate MAT applicability. |
Sixteen practitioner FAQs
1. Is the accounts loss the CYLA loss?
First reconcile accounts to taxable results. Book depreciation, disallowances and other-head income can change both amount and category.
2. Does a company use the individual new-regime loss rules?
Do not import section 115BAC. Apply the company’s actual regime and its own conditions.
3. Can current ordinary business loss meet bank interest?
It can where the interest and loss are eligible and no special bar applies. That is different from an earlier-year ordinary business loss.
4. Can current capital loss reduce operating profit?
No. Keep the capital-head restrictions intact instead of netting all heads together.
5. Can long-term loss meet short-term gains?
The long-term loss is confined to eligible long-term gains, as the fourth example demonstrates.
6. Can short-term loss meet long-term gains?
Eligible short-term capital loss can meet eligible long-term gains; maintain the relevant rate/source classifications.
7. What does the ₹2 lakh property limit restrict?
It restricts current property loss set-off against other heads under section 71(3A), not every intra-head property calculation.
8. Does a speculation loss become ordinary because it is in BP?
Classify the activity legally and use its matching pool. A shared schedule does not remove the restriction.
9. Which CYLA row is ordinary business income?
Row iii, linked to the positive ordinary-business result specified in the form and validations.
10. Where does the current business-loss pool originate?
The official validation ties CYLA 3i to BP item E 2vi. Reconcile the upstream BP working first.
11. What does CYLA column 5 show?
Remaining current-year income after the stated current-year loss adjustments, not the original gross income.
12. Is every remaining loss carried automatically?
Test its statutory category, filing conditions and other restrictions before reporting the eligible closing pool.
13. Can losses offset section 68 income covered by 115BBE?
Section 115BBE(2) bars that loss set-off; do not force the income through an unrestricted allocation.
14. Does filing late always stop current-year set-off?
Separate current-year use from the specified carry-forward conditions. Do not confuse those two questions.
15. Does nil normal income remove MAT?
Review section 115JB applicability and the independent book-profit computation separately.
16. What is the final review control?
Each rupee should reconcile from its source loss to permitted use and then to one correctly classified closing pool.
Conclusion
Map current company losses through the AY 2026–27 CYLA and CFL schedules, separating ordinary business, property, capital, speculation and restricted income.