Section 81 - Advance money received
Forfeited advance connected with failed transfer negotiations is adjusted under the specific rule and must not be duplicated in cost or other-source taxation.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Section 81 is presented using the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The general commencement date is 1 April 2026. Earlier years and saved proceedings may remain governed by the Income-tax Act, 1961 and the repeal/savings framework.
2-minute professional decode
Forfeited advance connected with failed transfer negotiations is adjusted under the specific rule and must not be duplicated in cost or other-source taxation.
Who should test this section?
Section 81 matters to investors, property owners, promoters, companies, firms and advisers where the transaction involves advance money received; the charge, computation and relief steps should be separated.
Evidence to retain
The section 81 file should preserve acquisition and transfer instruments, valuation or stamp records, payment evidence, holding-period material and every document that supports the treatment of advance money received.
1961 Act bridge
| Legacy provision | Legacy heading | Mapping |
|---|---|---|
| 51 | Advance money received. | Renumbered / mapped |
The bridge is a research aid. Legacy case law carries over only after the current wording and transition rules are matched.
Rules and forms linked to this section
No provision-specific Rule was independently mapped from the current Rules register for this section. That does not mean the wider Rules are irrelevant.
Worked application
A buyer’s advance is forfeited after negotiations fail. The tax treatment must be coordinated with Section 92 and any later cost computation.
Common mistake
For section 81, do not jump from sale proceeds to a capital-gain number: first identify the transfer/charging event, then consideration, cost, timing and any exemption or rollover condition relevant to advance money received.
Compliance approach
Identify the statutory trigger for section 81, lock the relevant tax year, reconcile the facts to the operative sub-section, preserve the evidence trail and separately test every linked Rule, Form, Schedule and exception before finalising the return position.
Numeric / timing checkpoints in the operative text
- (b) shall not be deducted from the said cost, where such advance or other money has been included in the total income of the assessee for any tax year as per the provisions of section 92(2)(h) of this Act or section 56(2)(ix) of the Income-tax Act, 1961 (43 of 1961).
Related provisions
Current statutory text
Primary-source trail
- Consolidated Income-tax Act, 2025 (as amended by Finance Act, 2026) (official external source)
- Income Tax Department - Act/Rules/Forms hub (official external source)
- CBDT commencement material - Act operative from 1 April 2026 (official external source)
Source status: full Section 81 statutory text in the local source corpus; reconciled to the current consolidated Act control on 8 October 2026.