venkat (manager) (88 Points)
27 September 2013Is the earnest money forfeited by the seller in a failed property transaction chargeble to income tax?is it to treated as capital receipt or revenue receipt??can this type of transactions help in converting black money to white?
Mihir
(Wealth Manager)
(5293 Points)
Replied 27 September 2013
It will be income from other sources or the sale consideration shall be reduced to the tune of the forfeited amount.
venkat
(manager)
(88 Points)
Replied 27 September 2013
to my understanding it would not be an income as per the income tax act 1961.Many courts have held it to be a capital receipt and not revenue receipt.such amount should be deducted from cost of purchase and not sale consideration.if you deduct them from sale consideration it would escape tax.
CAclubindia
