INCOME FROM BUSINESS & PROFESSION U/S 28

TO 44
Methods of Computing Income from Business &
Profession -
a. Direct Method  ….
i) If Profession is given in the Question
ii) Receipt & Payment A/c or Income & Exp. A/c
b. Indirect Method ...
i) If Business is given in the Question
ii) Profit & Loss Account is given in the question
Direct Method -
Allowable Income during the year      xxxxx
Less:     Allowable Expenses during the year  xxxxx
                                                                            ----------
 Total income from Profession                        xxxxxx
                                                                           =======
Indirect Method -
Net Profit as per Profit & Loss Account    xxxxx
Add: Disallowable Exp/ Income considered  +  xxxx
                                         Separately   
Less: Disallowable Income / Expenses          (-) xxxx
                                Considered separately
                                                                            ----------
 Total income from business                            xxxxxx
                                                                           =======

2+3=5

5-3=2
 Profit and Loss A/c
Par Rs Par Rs
To Tel Exp 20 By Sales 100
To Printing 20 By Profit on sale of motor car 30
To municipal taxes 10 By income tax refund 20
To Interest paid without TDS 10
To Net Profit 90
150 150

Par Rs Rs
Net Profit as per Profit & Loss Account    90
Add: Disallowable Exp/ Income considered Separately
Municipal taxes 10
Interest paid without TDS 10 20
Less: Disallowable Income / Expenses  Considered
separately       
Profit on sale of car 30
Income tax refund 20 (50)
Business Income 60

Disallowable Exp/
Income
considered Separately
Par Rs Par Rs
Telephone Exp 10 Sales 90
Income tax 20 Dividend from Company 10
Profit 70
100 100

Direct Method Indirect Method

Allowable Incomes Net profit as per P&L 70
Sales 90 Add: Disallowable
Exp/
Income
considered Separatel
y
Income tax 20
Less: Allowable Less: Disallowable
Expenses Income /
Expenses Considered
separately       
Telephone Exp (10) Dividend (10)

Business Profit 80 Business Profit 80