Aarika
Quick Summary
When you receive advance payments for services (such as AMC) it is generally treated as "income" in the same year even if you have not done the work or provided the service. What is the issue? The issue is - many service providers collect annual fees upfront and show it in the balance sheet as "in
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FAQ :
Advance payments for services are generally taxable in the year of receipt if they are non-refundable.
An advance payment is considered taxable in the year of receipt if it is non-refundable, meaning the payer cannot get it back.
No, accounting principles like the matching principle and AS-9 cannot override the charging provisions of the Income-tax Act regarding non-refundable advance payments.
The entire amount paid in advance in December 2025 will be taxed in the financial year 2025-26 because it was received in that year and is considered non-refundable.
Section 5 of the Income-tax Act states that a non-refundable advance payment is considered income and becomes part of your total income in the same year it is received.
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