INCOME FROM BUSINESS

AND PROFESSION
 IMPORTANT POINTS

• Profits in cash / kind taxed

• Voluntary receipts taxed
• Illegal incomes taxable
• Profits of distinct business must be computed separately
 INCOMES CHARGEABLE U/H BUSINESS OR
PROFESSION
• Business or professional income
• Salary interest bonus commission received by a partner from a firm
• Income from speculation business
• Trading in derivatives not speculative
• Profits from illegal business
INCOMES NOT TAXABLE UNDER THIS HEAD

• Income from house property held as stock in trade- under HP

• Profit / loss on sale of business assets – under capital gains
• Income from the activity of owing and maintaining race horses – under other
sources
• Casual income – other sources
 ALLOWABLE DEDUCTIONS (SEC 30 TO 37)

• Any expenditure incurred in the normal course of business in the best interest of
his business and incidental to his business
• No contingent expenditure
 FORMAT
Net profit as per Statement of profit / Loss Xxxx

Add: Expenses debited but disallowed Xxx

Add: Incomes taxable but not credited xx XXX

XXX

Less: Expenses allowed but not debited XXX

Less: Incomes credited but not taxable under this head xxx XXXX
/ exempt

Profits and gains from business XXX

 EXPENSES ON RESEARCH ACTIVITIES

• Revenue Expenditure on scientific Research – Fully deductible

• Capital expenditure on scientific research by assessee related to his /her
business– Fully deductible
 SCIENTIFIC RESEARCH EXPENSES
Expenditure Rate
Sum paid to scientific research association or 100%
to a University for scientific research
Cont to a Company engaged in scientific 100%
Research
To a approved University / institution for 100%
social science or statistical research
To a national laboratory or university or an 100%
IIT for approved scientific research
programme
Expenditure incurred by a company or 100%
scientific research on an approved in-house
research
 EXPENSES EXPRESSLY DISALLOWED

• Private expenses
• Capital expenditure
• Charity and presents
• Provision or reserves
• Past losses
• Expenses for Illegal activities
• Provision for tax or bad debts
• Excess depreciation
 DISALLOWED – UNDER CIRCUMSTANCES

• Excessive payments to relatives (40A(2))

• Aggregate (per day) Cash / bearer cheque payments to a person
exceeding 10,000 (35000 in case to a transport operator)
 EXCEPTIONS TO THE CASH PAYMENT

• Purchase of agricultural or forest product , dairy or poultry

farming
• Products of cottage industry
• Made in a village without banking service
• Payment – gratuity, retrenchment compensation (terminal benefits)
 ALLOWED ON ACTUAL PAYMENT

• Any tax duty, cess or fee

• Contribution to provident fund gratuity or superannuation fund
• Any interest on loan from public financial institution / NBFC/Scheduled bank
• Leave salary to employees
• Payable to Indian Railways
BLOCK OF ASSETS
 ADDITIONAL DEPRECIATION

• 20% of actual cost P&M

• Conditions
• Engaged in manufacture of an article or thing
• P&M Acquired and installed on or after 1.4.2005
• The asset must be used for at least 180 days during the PY of purchase , if less 10%
AD
• The asset is new