01-08-2025
Error in ITR-2 online utility: CA highlights technical bug which may lead to taxpayers with capital gains income, carry forward loss getting scrutiny notices later
The assessee has reported Long-Term Capital Gains (LTCG) of Rs 1,44,108 during the year, which is set off against a short-term capital loss of Rs 6,585, resulting in net LTCG of Rs 1,37,523. This is further set off against a brought forward loss of Rs 48,233 from AY 2023–24, leaving a balance of Rs 89,290, which is exempt under section 112A.
The BFLA schedule reflects this set-off of Rs 48,233 correctly. However, the CFL schedule continues to show Rs 48,233 as a carried forward loss, instead of reducing it to zero. This leads to a validation error during filing.
Unlike previous assessment years, the utility currently does not provide a 'Set Off' button, which would enable manual activation of the adjustment.
Additionally, while the BFLA - Utility form view correctly displays the row for LTCG taxable @ 12.5%, this row is completely missing in the preview or final PDF version of the return. The set-off details reflected in the utility are not carried forward into the preview, which appears to be a system error or rendering issue.
Academy
Empower your mind, elevate your skills
What is the error with ITR-2 online utility?
Section 70 and 74 of the Income Tax Act,1961 provides that, Short term capital loss (STCL) can be set off against both STCG and LTCG whereas Long-Term Capital Loss (LTCL) can be set off only against LTCG, and unabsorbed losses may be carried forward for up to 8 years, subject to certain conditions.
In the given case, there is an inconsistency in the online filing utility, specifically in the integration between Schedule Brought Forward Loss Adjustment (BFLA) and Schedule Carry Forward Loss (CFL). The taxpayer has a brought forward a capital loss of Rs 48,233 from AY 2023–24, which has been correctly adjusted against the remaining LTCG in Schedule BFLA. Post adjustment of the current year, STCL the entire brought forward loss also stands fully utilized. Accordingly, the Schedule CFL should reflect zero balance.
Despite the correct adjustment shown in Schedule BFLA, the utility continues to display the previous year losses under Schedule CFL as a carried forward amount. It is pertinent to note that this technical issue only appears in the online filing interface, and not in the Excel Utility of ITR -2 issued by the Income Tax Department.
Suresh Surana
Suresh Surana
What can happen if the income tax department does not fix this?
Risk of Scrutiny or Notices: Despite this error, if the taxpayers file their returns it may lead to incorrect carry-forward of losses, leading to adjustments during the assessment u/s Section 143(1) including rejection or modification of the return. Due to this, taxpayers may need to provide additional clarifications or file rectifications, increasing compliance burden and risk exposure.
Despite this error, if the taxpayers file their returns it may lead to incorrect carry-forward of losses, leading to adjustments during the assessment u/s Section 143(1) including rejection or modification of the return. Due to this, taxpayers may need to provide additional clarifications or file rectifications, increasing compliance burden and risk exposure. Issue in set-off of losses in future AY's - Incorrect carry forward of losses may cause issues in subsequent AY, especially when the taxpayer attempts to set off losses which had been already utilized in the prior years.
Chartered Accountant Aditi Bhardwaj has highlighted an error in the ITR-2 online filing utility on the e-filing portal. More specifically, there is an inconsistency in values in the Schedule Brought Forward Loss Adjustment (BFLA) and Schedule Carry Forward Loss (CFL) of the ITR-2 form. If this error is not fixed at once, then taxpayers filing ITR-2 online might encounter problems with their ITR getting rejected or adjusted under Section 143(1).Bhardwaj said on X (formerly Twitter): 'Error in Utility ITR 2:You may remember Aditi Bhardwaj had earlier pointed out an error in calculating Section 234C interest in the Income Tax Return Utility on X (formerly Twitter).ET Wealth Online has reached out to many Chartered Accountants to find out if Bhardwaj is correct. They said:Bhardwaj is right. In the given case, there is an inconsistency in the online filing utility, specifically in the integration between Schedule Brought Forward Loss Adjustment (BFLA) and Schedule Carry Forward Loss (CFL).We have reviewed a similar case in the ITR-2 utility with the same conditions, including LTCG, STCL set-off, and brought forward losses. However, we did not encounter the error mentioned in the CFL schedule or the discrepancy in the preview/PDF Income Tax Department said to Bhardwaj: 'Dear @CAAditiBhardwaj, We believe our team has been in touch with you regarding the issue. They are looking into this.'Surana explains:Soni has a contrarian view. He says: 'It is possible that the issue is specific to that particular return, the utility might be corrupted, or there may have been a data entry oversight. We recommend revalidating the JSON or rechecking the entries in a fresh instance of the utility.'Source: CA (Dr.) Suresh SuranaSource: CA (Dr.) Suresh SuranaAlso read: Step-by-step guide on how to file ITR-1 using excel utility with non-taxable LTCG income, salary, others Surana explains that if the tax department does not fix this error with ITR-2 online utility, the following may happen:
