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Section 81 of Income Tax Act 2025 in hindi

Where any capital asset was, on any previous occasion, the subject of negotiations for its transfer, any advance or other money received and retained by the assessee in respect of such negotiations—

(a)shall be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition;
1. (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).

Summary

This rule applies to any capital asset (valuable property) that was previously negotiated for sale, but the deal was cancelled and the taxpayer (assessee) kept (retained) the advance money.
Generally, this kept advance money must be subtracted from the cost of buying the asset (cost of acquisition), the written down value (depreciated tax value), or the fair market value when calculating your capital gains.
However, the kept advance money is NOT subtracted from the cost of the asset if it has already been taxed as part of your total income in any tax year.
This exception applies if the money was already taxed under section 92(2)(h) of this Act or section 56(2)(ix) of the old Income-tax Act, 1961 (Act number 43 of 1961).

Practical examples

1Vikram wanted to sell his house in Delhi in May 2026. He negotiated with an interested buyer who paid him an advance of Rs. 2,00,000, but the buyer backed out and Vikram kept the money. In November 2026, Vikram sold the house to a different person for Rs. 50,00,000. He had originally bought the house years ago for Rs. 10,00,000. Since the Rs. 2,00,000 advance was not taxed in his income return under section 92(2)(h), it must be deducted from his purchase cost. Therefore, his cost of acquisition becomes Rs. 8,00,000 (Rs. 10,00,000 minus Rs. 2,00,000) for calculating capital gains.

2Anjali received and kept an advance of Rs. 1,50,000 for a property deal that fell through in August 2025. This Rs. 1,50,000 was taxed as "Income from other sources" in her tax return for that year under section 56(2)(ix) of the old 1961 Act. When she sells the property in 2027, the Rs. 1,50,000 will NOT be subtracted from her original purchase cost of Rs. 12,00,000 because it was already taxed. Her cost of acquisition remains Rs. 12,00,000.

FAQ

1. How does kept advance money affect the cost of the asset?

It is subtracted (deducted) from the cost of purchase, the written-down value, or the fair market value of the asset when computing the cost of acquisition for capital gains.

2. When is the kept advance money not subtracted from the asset's cost?

It is not subtracted if the advance money was already included in your total taxable income for any tax year.

3. Which tax sections govern the prior taxation of this advance money?

It must have been included in total income under section 92(2)(h) of the new Act or under section 56(2)(ix) of the old Income-tax Act, 1961.

Test yourself

Q1.Under Section 81, what must be done with advance money received and kept from a failed property deal?

Q2.Under what condition is the retained advance money NOT subtracted from the cost of the asset?

Q3.Which section of the old Income-tax Act, 1961 is cross-referenced by Section 81?

Q4.What is the Act number of the Income-tax Act, 1961 mentioned in Section 81?

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