Forfeited advance money treatment in Income tax

This query is : Resolved

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!

ARUN GUPTA

ARUN GUPTA (Querist)
Follow

01 April 2025 Needed clarity regarding financial year relation to the year of set off for income tax purpose.

ARUN GUPTA

ARUN GUPTA (Querist)
Follow

01 April 2025 I need clarification if set off related to financial years .please clarify??

Nikhil Kaushik

Nikhil Kaushik (Expert)
Follow

02 April 2025 read the response. your issues have already been addressed. If you are still not sure, it is advisable to let your CA handle the tax filing for this one.

ARUN GUPTA

ARUN GUPTA (Querist)
Follow

02 April 2025 Just need to know financial year related to year in which set off made .

Upgrade to CAclubindia Pro. Subscribe Now!

ARUN GUPTA

ARUN GUPTA (Querist)
Follow

02 April 2025 I don't have any ca to file my returns.

Nikhil Kaushik

Nikhil Kaushik (Expert)
Follow

03 April 2025 answered this query earlier itself. You need to add back in the current year. And always engage a consultant when in doubt. in public forums, at best, we can give you generic responses based on limited information that you may have put out. Tax filings need to be done based on facts and proper review.