ASSIGNMENT

Submitted to: Proff. ZEESHAN ALAM

Name:-NOORJAHAN
Enrollment no.:-2019-342-071
Semester:-IX
Section:-B
School of law, HILSR, New Delhi
Subject: Law of Taxation
Topic:-Define Income from profit and gains from business and other
profession
 Introduction
 Meaning
 Section 28:basis of charge
 Non taxable business income
 Rent of house property
 Divided income
 Winning from lotteries on compensation
 Interest received on compensation
 General principles for allowing deduction
 Methods of accounting
 Importance of income from profit and gain
 Sources of income from profit and gains
 Taxation on income from profit and gains
 Reduction and allowances fro income from PGBP
 Accounting and reporting required for PGBP
 Financial planning for income from PGBP
 Technology and automation in PGBP
 Conclusion
  Profits and gains from business and other profession (PGBP)
 Introduction
 In the world of business and professions, earning money from gains and profits is
essential to long-term financial security and success. The tax system relies heavily
on Income from Profits and Gains from Business or Profession (PGBP).
 It is important in figuring out how much an individual or entity's taxable income
is. Earnings made by people or organizations doing business or practicing a
profession are referred to as income from PGBP. It includes earnings from selling
items, rendering services, renting out space, charging interest, making capital
gains, paying royalties, and receiving dividends, among other revenues and gains
from the trade or profession. Determining taxable income and meeting tax
responsibilities depend on the accurate identification and computation of income
from PGBP.
 Gains and profits from Apart from the first four incomes—income from pay, revenue
from residential property, income from capital gains, and income from other sources—
business or profession, also referred to as PGBP, is the third head in the income
computation. One of the main compass points used to calculate professional tax
registration is this one. The total income less the entire costs equals the profit. The
money obtained from the selling of financial or fixed assets is known as gain. It is
produced independently of corporate activities. Subtract the original purchase price
from the selling price.
 The gain or loss is the outcome. Divide the investment's gain or loss by the
investment's initial value, often known as the purchase price. Lastly, to find the
percentage change in the investment, multiply the figure by 100.
 Profits and gains of business or profession are charged under the heading of income
derived from your business or profession. The difference between the company
operating credits obtained and the incurred expenditures is the revenue subject to
taxation.
 Meaning
 Business: Buying, selling, or producing goods with the intention of turning a profit is
known as business. Any trade, commerce, manufacture, or adventure or concern
pertaining to trade, commerce, or manufacture is included.The profit made by the firm
is known as business income. All that is involved is total revenue less total expenses.
The taxable income or business income is the firm's profit.
 There are two categories of businesses:
 Speculative business income: This type of income is attributed to
businesses whose net income is not constant and varies periodically. For
instance, stock trading
 Income from non-speculative business: This category includes
businesses whose net income is constant and does not fluctuate over time.
Any manufacturing/business or any business note, for instance. Income
from futures and futures trading is included in this.
 Profession:A profession is any activity that one engages in to support oneself and
requires either manual or intellectual skill; examples of these professions include those
of a lawyer, doctor, auditor, engineer, and so forth. The vocation is a part of the
profession. Vocation: Vocation refers to an individual's innate capacity for performing
a specific task, such as dancing or singing.
 Profits: More revenue than expenses.
 Gains: Any unforeseen profits derived from the company. There is no value in
distinguishing between a business, profession, or vocation for income tax purposes
because the rules governing them are the same.
 Section 28 : Basis of charge
 The following incomes will be charged under this head and calculated in accordance
with the guidelines provided in sections 29 through 44DB.
 Any business or profession's profits or gains at any point in the preceding year
 Any money owed to or received by anyone under any name who oversees the entirety
or a substantial portion of the operations of an Indian company, at the time of his
management termination or in connection with the modification of the terms and
conditions
 revenue received by a trade, professional, or comparable association from the provision
of particular services to its members
 The worth of any benefit or perquisite that results from conducting business or
practising a profession, regardless of whether it can be exchanged for money
 Any interest, commission, pay, compensation, or bonus that a partner in a firm owes or
receives from a firm
 any revenue generated by the Duty Entitlement Pass Book Scheme's transfer.
 any money made from the Duty-Free Replenishment Certificate transfer.
 incentives for exporters to export
 Any amount acquired under the terms of the Keyman Insurance Policy, including
Bonus
 Any money received in exchange for not engaging in any business or professional
activity or for not disclosing any trade secrets, patents, copyrights, trademarks, etc.
 Any amount received or receivable in kind or cash in connection with the demolition,
destruction, disposal, or transfer of any capital asset (apart from real estate, goodwill,
or financial instruments) provided that the entire cost of the capital asset has been
written off under section 35AD.
 Revenue from Trading in Speculation

 Non-Taxable Business Income:

 Under this heading, "Profits and gains of business or profession," the following income
is not subject to taxation.

 Rent of House Property

 In the event that an assessee is engaged in the business of owning and renting out
residential properties, the income derived from this rental activity will be subject to
taxation under the heading "Income from house property" rather than as business
 income. On the other hand, if residential properties—such as apartments—are leased to
staff members in order to facilitate the assessee's own operations efficiently and the
rental income is incidental and subservient to the primary enterprise, it will be subject
to business income taxation.
 Divided income
 When an assessee engages in the business of trading shares and securities and receives
dividends from these business assets, the assessee's dividend income is subject to
taxation under the heading "Income from other sources" rather than under this
particular heading.

 Winning from Lotteries, Races, etc

 Even if a winning is obtained through a regular business activity, it is still subject to

taxation under the heading "Income from Other Sources" for lotteries, races, etc.
Income from these three activities must only be taxed under the designated heads of
income that have been established.

 Interest received on compensation or enhanced compensation

 The subject "Income from other sources" includes interest as taxable income. In
summary, section 234F of the Income Tax Return imposes a penalty for late filing of
income tax returns.

 General principles for allowing deduction

 The expenditure was supposed to have happened last year.

 Spending must be done with the intention of advancing the business.

 Previous business establishment-related expenses are not permitted.

 Expenditure on depreciation of the capital asset utilised, i.e., wear and tear, is allowed
at the rates specified in the Income Tax Act. Expenses related to a business that has
been discontinued are not allowed to be deducted.

 One is not permitted to deduct reserves, provisions for contingencies, or anticipated

losses.

 Businesses such as non-taxable ones are not eligible for a deduction. In India, income
from agriculture is exempt.

 Regarding the investment's depreciation, no deduction is permitted.

 Method of accounting
 Income deductions must be made using the cash or accrual accounting system that the
assesse uses on a regular basis.
 The Central Government has the authority to announce guidelines for income
disclosure and computation.

 Importance of Income from Profits and Gains

 For companies and professionals, revenue from PGBP is very important. It provides
information about the profitability and room for expansion of the endeavours and acts
as a gauge of financial success. The money made from gains and profits enables
business owners to grow their companies, draw in new investors, reinvest in their
operations, and establish long-term sustainability. Additionally, it stimulates
entrepreneurship and generates jobs, which benefits a country's overall economic
growth.

 Sources of Income from Profits and Gains

 PGBP income can come from a variety of business or professional sources. Sales
proceeds from products or services, property rentals, interest from investments, capital
gains from asset sales, dividends from investments, royalties from intellectual property,
 and other sources of income are some examples of these sources. Comprehending and
appropriately classifying the revenue streams is crucial for precise tax computations
and adherence.

 Taxation on Income from Profits and Gains

 The computation of taxable income from PGBP is heavily influenced by taxes.

Governments tax the money that professionals and businesses make in order to finance
the expansion of public services and infrastructure. The jurisdiction and legal
framework of the business or profession determine the tax rates and regulations. To
ensure compliance and prevent penalties, individuals and entities must comprehend the
applicable tax laws, keep accurate records, and fulfil their tax obligations.

 Deductions and Allowances for Income from PGBP

 Individuals and entities are entitled to claim deductions and allowances for expenses
incurred during their business or profession in order to determine their taxable income
from PGBP. Together with rent, employee salaries, utilities, marketing expenses,
professional fees, depreciation, and other allowable expenses, these deductions and
allowances also contribute to lowering the taxable income. Maintaining correct
documentation and abiding by the rules pertaining to deductions and allowances are
crucial.

 Accounting and Reporting Requirements for PGBP

 For financial transparency, regulatory compliance, and well-informed decision-making,

PGBP must maintain accurate accounting and income reporting. Accounting standards
and guidelines must be followed by professionals and businesses in order to prepare
financial statements, keep accurate books of accounts, and record transactions. In
addition to making tax compliance easier, sound accounting procedures also shed light
on the ventures' performance and financial standing.
  Investment Strategies for Maximizing Income from PGBP

 The use of investment strategies is essential for optimising PGBP income. By putting
money into diversified investment portfolios, professionals and businesses can make
more money with their extra cash. Making wise investment choices that are supported
by in-depth analysis and market research can help reduce risks and promote long-term
financial success. Investing in real estate, mutual funds, stocks, bonds, and other
acceptable investment vehicles can boost overall profitability and present growth
prospects.

 Challenges and Risks Associated with PGBP

 Businesses and professionals in PGBP face a variety of risks and challenges, despite
the allure of pursuing profits and gains. Common obstacles affecting profitability
include competition, shifting market conditions, technological disruptions, regulatory
changes, economic uncertainty, and financial limitations. To effectively navigate these
challenges, ventures need to implement risk management strategies, stay abreast of
industry developments, and maintain their adaptability.

 Financial Planning for Income from PGBP

 To maximise revenue from PGBP, careful financial planning is essential. Both

professionals and entrepreneurs need to create thorough financial plans that cover
investment strategies, cash flow management, forecasting, and budgeting. Ventures can
guarantee long-term sustainability and increase profitability by keeping an eye on
important financial indicators, cutting expenses, and coordinating financial targets with
business goals.

 Marketing and Growth Strategies for PGBP

 To optimise their revenue from PGBP, professionals and businesses need to have
strong growth and marketing strategies. Gaining market share, drawing customers, and
accelerating revenue growth are all facilitated by efficient branding, pricing plans,
 market research, advertising, and customer relationship management. In today's
dynamic marketplace, professionals and businesses can gain a competitive advantage
by utilising digital platforms, adopting data-driven marketing strategies, and
investigating new market opportunities.

 Technology and Automation in PGBP

 The way professionals and businesses operate has been completely transformed by
technological advancements, which opens up new possibilities for PGBP in terms of
profitability and efficiency. Accepting automation, AI, cloud computing, and data
analytics can improve decision-making, lower expenses, and open up new revenue
opportunities. Adopting creative solutions and keeping up with technology trends are
essential for remaining competitive in today's business environment.

 Conclusion

 A major part of the financial picture for professionals and businesses is Income from
Profits and Gains from Business or Profession (PGBP). It promotes financial
sustainability, acts as a barometer of success, and boosts general economic expansion.
For professionals and entrepreneurs, it is essential to comprehend the meanings,
differences, significance, sources, taxation, deductions, accounting requirements,
investment strategies, difficulties, financial planning, and marketing tactics associated
with PGBP income. Through the effective management of these factors, businesses can
maximise profits, attain long-term expansion, and enhance economic prosperity.