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I am able to make bookings of one train after another as a single ticket under the "onward" journey concept for a lesser fee than the sum of the individual tickets over a ticket counter, but the same cannot be done on the website.

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Short Answer: No one really knows / its too complex for a computer to understand :P

Long Answer: When you book an onward ticket at the counter, effectively what is being done is that your entire travel is being considered as one, and the first tiket is issued from your originating station to the destination and a reservation is made upto the first change over point.
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The second "ticket" that you get in a counter is actually just a reservation slip (of zero value). This way you combine a ticket from x to z and a reservation from x to y into one ticket and then get another reservation slip from y to z.

Such a combination requires careful application of rules when combining different classes of travel / types of trains / dates / distances involved etc. Just to explain imagine if you are combining a pure day train (with just chair car classes) with a train that involves day and night travel (with sleeping facility) you will need to combine Chair Car travel (with or without AC) with a sleeper class travel (with or without AC) or first class (with or without AC) which would mean the fare would have to be calculated for the higher class of travel and the clerk will also have to confirm that there are combinable train services availabe to the station you are taking the ticket to, which is complex considering weekly trains, special trains, classes and what not...there are many such other complications involved.

IRCTC and even CRIS which is the IT wing of sorts of Indian Railways have not yet come up with rules and procedures which can be applied without intervention of a human being to verify the validity of such a ticket.

Earlier this telescopic (reduced fare) travel benefit was available from and to any station, however Railways vide their commercial circular Indian Railways Commerical Circular has indicated that such issue of tickets leads to frauds and made this facility available only in case of break journeys and Circular journey tickets which are also special circumstances requiring careful manual verification prior to issue of tickets.

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