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Microlesson · 5-min read

Other Miscellaneous Items - Forfeited Advance, Renting of P&M, MP/MLA Salary

# Miscellaneous IFOS Items

## 1. Advance Money Forfeited [Section 56(2)(ix)]

  • If advance money (e.g., earnest deposit on intended sale of a capital asset) is forfeited on or after 1.4.2014Taxable under IFOS in the year of forfeiture.
  • Such forfeited amount is NOT deducted from COA of the asset in subsequent computation (since already taxed).
  • (Forfeitures before 1.4.2014 were deducted from COA at time of eventual sale — old regime.)

## 2. Income from Renting of Plant & Machinery / Furniture

  • If not taxable under PGBP (i.e., not the assessee's business) → Taxable under IFOS.
  • Composite letting (P&M + Building) that is inseparable → IFOS.
  • Deductions allowed (Section 57): Same as PGBP provisions — depreciation, repairs, insurance, etc.

### Computation:

ParticularsAmount
Rent AmountXX
(−) Deduction of Expenses (depreciation, repairs, insurance, etc.)(XX)
Income from Other SourcesXX

## 3. Salary Income of MP / MLA

  • Taxable under IFOS (no employer-employee relationship exists with Parliament/Legislature).
  • Daily Allowance and Constituency AllowanceFully Exempt under Section 10(17).
  • Other salary (pay + allowances from Parliament/Assembly) → Taxable under IFOS.

Worked example

### Example 1

Example 1 — Forfeiture: Mr. P agreed to sell land for ₹ 40 lakhs and received ₹ 5 lakhs advance in 2025. Buyer defaulted; Mr. P forfeited the ₹ 5 lakhs. ₹ 5 lakhs → Taxable under IFOS in P.Y. 2025-26. COA of land for future sale = unaffected.

### Example 2

Example 2 — Renting of P&M: Ms. Q owns a printing press (not used in her business) and leases it for ₹ 6 lakhs p.a. Depreciation: ₹ 1 lakh; Maintenance: ₹ 50,000. IFOS = 6,00,000 − 1,00,000 − 50,000 = ₹ 4,50,000.

### Example 3

Example 3 — MLA: Mr. R is an MLA, receiving ₹ 50,000/month salary, ₹ 10,000/month constituency allowance, ₹ 1,000/day daily allowance. Salary (₹ 6 lakhs p.a.) → Taxable IFOS. Constituency Allowance + Daily Allowance → Exempt u/s 10(17).

⚠️ Common exam mistakes

  • Treating MP/MLA salary under "Salaries" head — must be IFOS.
  • Taxing daily/constituency allowance of MP/MLA — fully exempt.
  • Continuing to deduct pre-1.4.2014 forfeiture rules (deduct from COA) for current-year forfeitures.
  • Not allowing expense deduction for P&M/furniture renting income — full PGBP-like deduction is allowed.
Bare-Act text Sections 56(2)(ii), 56(2)(iii), 56(2)(ix), 10(17) · Income Tax Act, 1961 · click to expand
Section 56(2)(ix): Forfeited advance money received on or after 1.4.2014 in the course of negotiations for transfer of a capital asset is chargeable under IFOS. Section 56(2)(ii)/(iii): Income from letting of machinery, plant or furniture (with or without building) belonging to the assessee, where the same is not chargeable under PGBP, is chargeable under IFOS. Section 10(17): Daily allowance and constituency allowance of MP/MLA is exempt.
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