The Statutory Brief

IT Act 1961 → 2025 / Section 51

Capital gains

Section 51 → Section 81

Advance money received and forfeited in earlier negotiations

Section 51 of the old Income-tax Act, 1961 · new section 81 under the Income-tax Act, 2025

New reference Section 81

Income-tax Act, 1961Section 51

  • Advance retained on a failed deal reduces the cost of acquisition
  • Not reduced if already taxed under 56(2)(ix) (forfeitures from 1 April 2014)
  • Applies to cost, WDV or FMV as the case may be

Applies to FY 2025-26 (AY 2026-27) and earlier years.

Income-tax Act, 2025Section 81

  • Section 81(a): deducted from cost, WDV or FMV
  • 81(b): not deducted if taxed under section 92(2)(h) of the 2025 Act or 56(2)(ix) of the 1961 Act
  • Same principle

Applies from tax year 2026-27 (from 1 April 2026).

What changed

Renumbered; cross-references updated.

Practice notes

  • Forfeited advance received after 1 April 2014 is taxed as other sources in the year of forfeiture.

These are summaries, not the statutory text. Read the bare Act for both sections on the Income Tax Department's official site, which also has a side-by-side comparison utility.

Frequently asked

How is forfeited advance money taxed under the new Income Tax Act?

It is income from other sources under section 92(2)(h); section 81 then stops it from also reducing the cost of acquisition.

What is section 51 called in the new Income-tax Act, 2025?

Section 51 of the Income-tax Act, 1961 corresponds to Section 81 of the Income-tax Act, 2025, which applies from 1 April 2026 (tax year 2026-27).

What changed in section 51 under the new Income Tax Act?

Renumbered; cross-references updated.

Is section 51 still applicable for FY 2025-26?

Yes. Income of FY 2025-26 (AY 2026-27) and earlier years is governed by section 51 of the 1961 Act. Section 81 of the 2025 Act applies from tax year 2026-27.

Related sections

56→92Income from other sources, including taxable gifts (old 56(2)(x))48→72How capital gains are computed: sale value less transfer expenses and cost46–55A→68–91Liquidation, buy-back, cost by mode of acquisition, depreciable assets 50, MLD 50AA, unquoted shares 50CA, advance money 51, 54D–54H, valuation officer