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of <h1>Advance Money Forfeited in Failed Asset Deals Taxable as Income, Not Capital Loss, Per Section 56(2)(ix).</h1> Section 56(2)(ix) of the Income Tax Act stipulates that any advance money received during negotiations for transferring a capital asset, which is subsequently forfeited due to the failure of the transaction, is taxable as 'Income from Other Sources' for the seller. Forfeitures before April 1, 2014, are handled under Section 51, reducing the asset's cost. Post-April 1, 2014, such forfeitures are not deducted from the asset's cost. For the buyer, forfeited amounts do not qualify as a capital loss. If the seller compensates the buyer for a failed deal, it is treated as capital gains for the buyer.
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