CHRIST

Deemed to be University

Unit 4: Profits and Gains from Business or Profession

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Deemed to be University

Charging Provisions u/h Business or Profession

1. Business or Professional Income
2. Compensation
3. Income of a Trade or Professional Association
4. Export Incentives
5. Value of benefit/perquisites
6. Salary, Interest, Bonus, Commission or Remuneration by a partner from a Firm
7. Any amount received under certain agreement fro not to carry on
business/profession
8. Speculation business
9. Profit from an Illegal Business
10. Amount received under Keyman Insurance Policy
11. Transfer of Certain Capital Assets specified u/s. 35 AD
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 CHRIST
Deemed to be University

Deductions
Sec 30: Rent, Rates, Taxes, Repairs & Insurance in case of Building

Sec 31: Repairs & Insurance of Machinery, Plant and Furniture

Sec 32: Depreciation on Fixed Assets (Tangible Assets: 5%, 10%, 15%,
20%, 30%, 40%; Intangible Assets: 25%)

Sec 35: Expenditure incurred in the filed of Scientific Research

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 CHRIST
Deemed to be University
Sec 35: Expenditure on Scientific Research

In-house research: (100%)

○ Expenditure incurred by a business /company related to research (Research must relate to the
business if the assessee) is eligible
○ Both capital and revenue expenditure, incurred during the relevant previous eligible.
○ Capital expenditure does NOT include purchase of land for research purpose.
○ Revenue/capital expenditure incurred during 3year immediately preceding the year at
commencement of business is also eligible.

Contribution to Approved Agencies/Institutions: (Research need not be related)

○ To any Scientific Research Association : 100 % of amount contributed
○ To any University/College for social science/statistical research: 100 % of amount contributed
○ To any company engaged in scientific research: 100 % of amount contributed
○ Towards national lab/ university/ IIT/ approved by prescribed authority: 100% of amount
contributed.

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Excellence and Service
 CHRIST
Deemed to be University

Sec 35AD: (100% deduction) Any capital expenditure incurred by

assessee for specified businesses such as:-
○ Setting up and operating a cold chain facility. (set up after 1/4/2009)
○ A ware house facility for storage of agricultural produce. (set up after 1/4/2009)
○ Laying up and operating across country natural gas, crude oil or petroleum pipeline network
for distribution including storage facility of such network. (set up after 1/4/2007)
○Building & Operating hotel (2 star & above) on or after 1/4/2010
○Building & operating hospital with at least 100 beds set up on or after 1/4/2010
○Developing & Building a housing project for slum development on or after 1/4/2010
○Production of Fertilizers on or after 1/4/2011
○Setting up & operating Inland Container Depot or Container Freight Station on or after
1/4/2012
○Bee-keeping and production of honey and bees wax on or after 1/4/2012
Note: Any capital expenditure exceeding Rs. 10,000 in cash shall be disallowed.

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Deemed to be University

Sec 35D: Amortization of preliminary expenses

● Expenditure incurred prior to commencement of business such as

feasibility report, market survey, legal charges, printing fee,
registration etc.
● It does not include any capital expenditure.
● Deduction can be claimed up to 5 % of cost of project or 5% of
capital employed over a period of five years in equal annual
installments commencing from the relevant previous year in which
the new business commenced or extension of existing business is
completed.

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Deemed to be University

Sec 37(1): General deductions

● All revenue expenditure related to business is allowed as deduction provided:
○ Expenses should not be of capital nature
○ It should not be personal expenditure
○ It should have been incurred exclusively and wholly for the purpose of
such business
○ Not to be in the nature of fine or penalty paid in offence of any law
 

● Sec 37 (2b): any expenditure incurred on advertising in political souvenir

(manifesto/book) is not allowed as deduction.
 

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Deemed to be University

Format: Income from Business

Particulars Rs Rs
Net profit (as in P&L a/c)   xx
Add:    
Inadmissible expenses which are already debited   xx

Admissible income which are not credited   xx

Less:    
Admissible expenses which are not debited   xx

Inadmissible income which are already credited   xx

Taxable Business Income   xxxx

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Excellence and Service
 CHRIST
Deemed to be University

Exercise 1: Compute Business Income

General Expenses 1,07,000 Gross Profit 5,40,000
Bad Debts 1,000 Interest from Govt Securities 4,000
Salaries 1,65,000 Rent received from employees 12,000
Advertisement (in cash) 22,250 Interest from debtors for delayed payment 6,000
Proprietor’s salary 1,12,500
Interest on Capital 2,000
Income Tax 1,000
Depreciation 2,000
GST (due) 5,000
Advance Income Tax paid 1,000
Donations 500
Motor car expenses 750
Municipal taxes of quarters to employees 5,000
Net Profit 1,39,000
5,66,000 5,66,000

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Deemed to be University

Contd…

● A) General expenses include Rs. 4000 paid as compensation to an old employee whose services
were terminated in the interest of the business and Rs. 2200 by way of help to a poor student.
● B) Depreciation calculated according to the rates comes to Rs. 2900.
● C) GST was paid on 1-5-2021; date of filing of return is 31-7-2021.
● D) 50% of motor-car expenses are for the proprietor’s personal use.
● Compute the taxable business income

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Deemed to be University

Income from Profession

Particulars Rs Rs
A. Professional Receipts
a)  XX  
b)  XX

c)  XX

B. Professional Expenses    
a)  XX

b) XX 

Taxable Professional Income (A – B)   XXX

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