'Profits and Gains of Business or Professions' [Section 28 to 44]

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Define … ‘Profits and Gains of Business or Profession’ and its Computation (Section 28)

1. Business Incomes Taxable under the head of ‘Profit and Gains of Business or Profession’ (Section 28).

2. Business Income Not Taxable under the head ‘Profit and Gains of Business or Profession’

3. Mode of Taxation on Certain Incomes (Section 145B)

4. Basic Principles for Computing income Taxable under the head ‘Profit and Gains of Business or Profession’

Method of Accounting for Computing Business Income (Section 145)

1. Income to be computed either on the basis of cash or mercantile system of accounting [Section 145(1)]

2. Central Government empowered to notify income computation and disclosure standards [Section 145(2)]

3. Assessing Officer empowered to make assessment in the manner provided under section 144 in certain cases [Section 145(3)]

4. Method of accounting in Certain Cases [Sec. 145A] –

5. Income Computation and Disclosure Standards (ICDS)

Principles for Allowing Business Deductions / Allowances from Profits and Gains of Business or Profession.

Before studying the nature and amount of permissible and non-permissible deductions under sections 30 to 43D, it will be useful if one keeps in view the following principles governing admissibility of these deductions:

Expenses Allowed as Deductions against Profits and Gains of Business or Profession [Section-30-37]

1. Rent, Rates, Taxes, Repairs And Insurance For Building [Section 30]

2. Repairs and insurance of machinery, plant and furniture [Section 31]

3. Depreciation [Section 32]

4. Investment allowance in Notified Backward Area in Andhra Pradesh, Bihar, Telangana or West Bengal [Section 32AD]

5. Tea/Coffee/Rubber Development Account [Section 33AB]

6. Site Restoration Fund [Section 33ABA]

7. Expenditure on Scientific Research [Section 35]

8. Expenditure for Obtaining Right to use Spectrum for Telecommunication Services [Section 35ABA]

9. Expenditure for obtaining Licence to operate Telecommunication Services [Section 35ABB]

10. Deduction in respect Of Expenditure On Specified Business [Section 35AD]

11. Payment to Associations and Institutions for carrying out Rural Development Programmes [Section 35CCA]

12. Expenditure on Agricultural Extension Project [Section 35CCC]

13. Expenditure on Skill Development Project [Section 35CCD]

14. Amortisation of Preliminary Expenses [Section 35D]

15. Amortisation of expenditure in case of Amalgamation / Demerger [Section 35DD]

16. Amortisation of Expenditure under Voluntary Retirement Scheme [Section 35DDA]

17. Amortisation of Expenditure on Prospecting etc., for Development of Certain Minerals. (Section 35E)

18. Insurance Premium [Section 36(1)(i)]

19. Bonus or Commission to Employees [Section 36(1)(ii)]

20. Interest on Borrowed Capital [Section 36(1)(iii)]

21. Discount on issue of Zero Coupon Bonds [Section 36(1)(iiia)]

22. Employer’s Contribution to Recognised Provident Fund and Approved Superannuation Fund [Section 36(1)(iv)]

23. Employer’s Contribution to National Pension Scheme (NPS) [Section 36(1)(iva)]

24. Contribution towards Approved Gratuity Fund [Section 36(1)(v)]

25. Employees’ Contribution to Staff Welfare Schemes [Section 36(1)(va)]

26. Allowance in respect of Dead or Permanently useless Animals [Section 36(1)(vi)]

27. Bad debts [Section 36(1)(vii)]

28. Provision for Bad and Doubtful Debts relating to Rural Branches of Commercial Banks [Section 36(1)(viia)]

29. Transfer to Special Reserve [Section 36(1)(viii)]

30. Family Planning Expenditure [Section 36(1)(ix)]

31. Securities Transaction Tax [Section 36(1)(xv)]

32. Commodities Transaction Tax [Section 36(1)(xvi)]

33. Expenditure by Co-Operative Society for purchase of Sugarcane [Section 36(1)(xvii)

34. General Deductions [Section 37]

[Section 37(1)] : General Or Allowable Deductions under Business or Professions

1. Conditions for Allowance of General Deduction from Business Income Under Section 37(1)

2. List of Expenditure Allowable as a Deduction Under Section 37(1) from Business Income :

3. List of Expenditures NOT Allowable as Deduction Under Section 37(1) from Business Income :

Business Losses Deductible under the head  'Profits and Gains of Business or Profession'.

1. Business Losses which are Deductible from Business Income

2. Business Losses which are Not Deductible from Business Income

Expenses Not Deductible under the head 'Profits and Gains of Business or Profession (Section 40, 40A, 43B)

1. Interest, Royalty, Fees for Technical Services Payable Outside India or Payable to a Non-Resident [Section 40(a)(i)] -

2. Disallowance of Expenditure in respect of any Payment / Credit to a Resident [Section 40(a)(ia)]

3. Default pertaining to Non-Deduction / Non-Deposit of Equalisation Levy [Section 40(a)(ib)] -

4. Disallowance of royalty, licence fees, etc., in case of State Government Undertakings [Section 40(a)(iib)] -

5. Salary Payable outside India without Tax Deduction [Section 40(a)(iii)] -

6. Tax on Non-Monetary Perquisite paid by the Employer [Section 40(a)(v)] -

7. Amounts Not Deductible in respect of Payment to Ralatives [Section 40A(2)]

8. Amounts Not Deductible in respect of Expenditure exceeding Rs. 10,000 (Rs. 35,000 if an assessee makes payment for Plying, Hiring or Leasing Goods Carriages) [Section 40A(3)] -

9. Disallowance in respect of Provision for Unapproved Gratuity Fund [Section 40A(7)]:

10. Amount Not Deductible in respect of contributions to Non-Statutory Funds [Section 40A(9)] -

11. Certain Deductions to be Allowed only on Actual Payment Basis [Section 43B]

DEEMED PROFITS Chargeable to Tax as Business Income Under Profits and Gains of Business or Professions [Section 41]

1. Recovery against any Allowance or Deduction Allowed earlier [Section 41(1)]

2. Balancing Charge on Assets of an undertaking engaged in Generation or Generation and Distribution of Power [Section 41(2)].

3. Profit on Sale of Capital Assets used for Scientific Rresearch [Section 41(3)].

4. Recovery out of Bad Debts Allowed as a Deduction [Section 41(4)]:

5. Amount withdrawn from Special Reserve Created and Maintained by certain Financial Institutions [Section 41(4A)]:

6. Adjustment of Loss [Section 41(5)] -

7. Recovery after Discontinuance of Business or Profession [Section 176(3A), (4)]

Taxation of Undisclosed Business Income/Investments from Undisclosed Sources

1. Cash Credit [Section 68] -

2. Unexplained investments [Section 69] -

3. Unexplained Money, etc. [Section 69A] -

4. Amount of Investments, etc., not fully disclosed in books of account [Section 69B] -

5. Unexplained Expenditure, etc. [Section 69C] -

6. Amount Borrowed or Repaid on Hundi [Section 69D] -

Deduction in respect of Expenditure incurred on setting up of a Specified Business [Section-35AD] :

1. To whom Deduction Under Section-35AD shall be allowed :

2. Nature and Amount of Deduction Under Section-35AD:

3. Expenditure incurred prior to commencement of operation to be allowed in the year of commencement of operation Under Section-35AD:

4. Conditions to be satisfied by the Specified Business to apply the Section-35AD:

5. Consequences Of Claiming Deduction Under Section 35AD -

When Maintenance of Books of Accounts becomes Compulsory (Section 44AA)

1. Persons carrying on “Specified Professions” [Section 44AA(1)] :

2. Persons carrying on “Non-Specified Professions” or any Business [Section 44AA(2)]

3. When maintenance of Books of Account Not Necessary .

4. Consequences of Failure to Keep Accounts, etc:

Compulsory Audit of Books of Accounts by Chartered Accountant (Section 44AB)

Find out the different Taxpayers who are required to get their Accounts Compulsorily Audited by a Chartered Accountant

Computation of Income On Estimated Basis Under Sections 44AD, 44ADA and 44AE

1. Computation of 'Business Income' On Estimated Basis Under Section 44AD -

2. Computation of 'Professional Income' on Estimated Basis Under Section 44ADA -

3. Computation of Income on Estimated Basis in the case of Business of Plying, Leasing or Hiring Trucks / Goods Carriages [Section 44AE] -