Forfeited advance money treatment in Income tax

This query is : Open

ARUN GUPTA (Querist)
Follow

29 March 2025 am a proprietor of gst firm and I took advance of Rs5lakhs from a party with condition that the party will give other 15 lakhs with in 30days for supply of goods .If party fails to give the money I will forfeit Rs5 lakhs.now party failed to give balance money.I want to show 5 lakhs in profit account.how this money will be treated by income tax for taxation purpose.my basic income is less the 7 lakhs rupees.will this 5lakh rupees come under basic exemption.pl explain with details .

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

29 March 2025 The five lakhs Rs. will be added to your other income and eligible for basic exemption and rebate as well.

ARUN GUPTA

ARUN GUPTA (Querist)
Follow

29 March 2025 This Rs5 lakh advance was taken in fy 2021-2022 and now I want to write off in fy 2024-2025 in my proprietorship firms profit and loss account.what is the entry proces?

Upgrade to CAclubindia Pro. Subscribe Now!

ARUN GUPTA

ARUN GUPTA (Querist)
Follow

29 March 2025 Can I show this in proprietorship profit and loss account? Can set off expenses against this income?

ARUN GUPTA

ARUN GUPTA (Querist)
Follow

29 March 2025 Please clarify my queries ?

Nikhil Kaushik

Nikhil Kaushik (Expert)
Follow

30 March 2025 yes, you need to add this to your income this year. Credit Other incomes, debit the advance account. This will increase your total income and the tax needs to be calculated on that final taxable income.

ARUN GUPTA

ARUN GUPTA (Querist)
Follow

30 March 2025 Advance received in fy 2021-22 and shown forfeited in fy 2024-2025 will not have any effect.

ARUN GUPTA

ARUN GUPTA (Querist)
Follow

31 March 2025 Please clarify whether advance received in one fy can be shown off in any other fy .can we adjust advance in any fy irrespective of receiving financial year.pl clarify?

Upgrade to CAclubindia Pro. Subscribe Now!