Schdule BFLA and CFL Error regarding adjustment of Losses

According to the Income Tax rules, Short Term Capital Loss (STCL) can only be set off against Short Term Capital Gains (STCG), and Long Term Capital Loss (LTCL) can only be set off against Long Term Capital Gains (LTCG). The system’s current automatic adjustment of STCL against LTCG in Schedule BFLA is incorrect and is likely a portal bug.

To correct this:

1. Use the offline ITR-2 utility (Excel/Java) from the Income Tax portal, enter your capital gains/losses in the correct schedules, and manually adjust the set-off in Schedule BFLA before generating and uploading the JSON file.

2. If you must file online and the system doesn’t allow edits, raise a technical grievance through the e-Filing Helpdesk, clearly stating the issue and attaching screenshots.

This will ensure the correct carry-forward loss is shown in Schedule CGL and the correct LTCG tax liability is calculated.

If you want, I can also make a LegalDev-branded short advisory version that feels like a professional CA note for your website or email reply.

I am informed from few sources that STCL on shares can be adjusted as setoff from Both STCG and LTCG where as LTCL can only be setoff from LTCG. If so, then what system has done must be correct only. Please check and confirm.