Dear all,
I want to know whether the following income is exempt under Income Tax or not (if possible please quote the section)
when a contract is entered to sell a agricultural land and the buyer pays some advance (also known as bayana)
unfortunately the buyer is unable to purchase the land for some reason and the seller forfeits the advance amount
is forfeited amount taxable in the hands of seller
Section 51
Advance money received and forfeited shall be deducted from the cost of acquisition.
if the previous owner has received any advance and forfeited, shall not be deducted :)
it means ultimately the income would be taxable when the land is sold
forfeited amount is taxable in the hands of the seller under the head "income from other sources" if the land is not sold in the same A.Y .No Capital Gain wud be payable.
However if the land is sold in the same AY then the amount recieved from the sale and forfieted advance amount wud be clubed together and charged under the head CAPITAL GAIN.
If the land is Agricultural Land only then can Capital Gain be avoided..But there are very strict norms for a land to be taken as agricultural..kindly keep that in mind..Just being in a village area is not enough..
mm.. Agree :)
CAclubindia
