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Profits and Gains of Business
or Profession
Lecture Notes
Basis of Charge (Section 28)
 Following Incomes shall be charged to tax under this
head
 1. Profit and Gains of any busi...
Basis of Charge (contd.)
 5. Value of any benefit or perquisite, whether
convertible into money or not, arising from
busi...
Business & Profession
 Business
includes any Trade, Commerce or Manufacture
or any adventure in the nature of Trade,
Comm...
Deduction Allowable
 1. Rent, Rates, Taxes and Insurance of Building
( u/s 30)
 2. Repairs and Insurance of Machinery, P...
Depreciation (u/s 32)
 Following conditions are to be fulfilled.
 a) Assessee must be owner of the Asset.
 b) Asset mus...
Depreciation
 Deprecation is allowed in respect of
 a) Building
 b) Plant & Machinery
 c) Furniture
 d) Motor Vehicle...
Depreciation
 Depreciation is allowed on the Written Down
Value of Block of Assets
 Opening WDV XX
 Add : Purchases dur...
Additional Depreciation
 Additional Deprecation @ 20 % of Actual Cost
of Machinery acquired after 31.03.2002 for
 a) New...
Expenditure of Scientific Research U/s 35
 Any Expenditure (other than Cost of Land) expended on
scientific research rela...
Expenditure for Obtaining License to operate
Telecommunication Services U/s 35ABB
 Allowed as Deduction equally over the
...
Other Expenditures
 35AC : Expenditure on Eligible Projects
 35CCA : Expenditure for carrying out rural
development prog...
Amortisation of
 Preliminary Exp deduction is allowed in 5
Years ( Section 35D)
 Amortisation of Amalgamation or Demerge...
Other Deduction u/s 36
 i) Insurance premium paid to cover the risk
of damage or destruction of Stock
 Ii) Bonus or Comm...
General Expenses u/s 37
 Conditions to be fulfilled
 i) Expenditure should not be in the
nature prescribed u/s 30 to 36
...
Advertisement Expenses
( Section 37(2B)
 Deduction is not allowed in respect of
expenditure incurred by an assessee
on ad...
Disallowance u/s 40a
 Interest Royalty Fees for Professional
Services paid outside India without
deducting TDS
Disallowance us/s 40 a
 Payment to Resident without deducting TDs
 Following payments are covered
 I) Interest
 II) co...
Disallowance us/s 40 a
 Securities Transaction Tax
 Fringe Benefit Tax
 Income Tax
 Wealth Tax
 Salary paid outside I...
Disallowance u./s 40 (b)
 Amount not Deductible in case of
Partnership Firm
 I) Interest exceeding the rate
specified in...
Remuneration to Partner
 Is allowed upto the following limits
 First Rs 3,00,000 - 90 % or Rs 1,50000
 which ever is hi...
Disallowance u/s 40 A
 Excessive Payment to Relatives
 Payment exceeding Rs 20,000 in
mode otherwise than Crossed cheque...
 Contribution to Non Statutory Funds
 Provision for Unapproved Gratuity
Fund
Section 43 B : Deduction on
Payment Basis
 Following will be allowed as Deduction on actual paid
basis.
 Outstanding amo...
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Profits and Gains of Business

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Transcript of "Profits and Gains of Business"

  1. 1. Profits and Gains of Business or Profession Lecture Notes
  2. 2. Basis of Charge (Section 28)  Following Incomes shall be charged to tax under this head  1. Profit and Gains of any business or Profession carried on by the assessee  2. Any Compensation or other payments due or received by assessee, for loss of agency, due to termination or modification in terms and conditions of such agency  3. Income derived by a trade, professional or similar association, for specific services performed; for its members.  4. Export Incentives received by Exporter such as Sale of licenses, Cash Assistance, Duty Drawback
  3. 3. Basis of Charge (contd.)  5. Value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession  6. Interest, Salary, Bonus, Commission or remuneration due o or received by, a partner of a firm from such firm.  7. Sum Received or receivable in cash or kind for  a) not carrying out any activity  b) not sharing any knowhows, patent etc.  8. Sum Received under Keyman Insurance Policy  9. Income from Speculative Business.
  4. 4. Business & Profession  Business includes any Trade, Commerce or Manufacture or any adventure in the nature of Trade, Commerce or Manufacture. Profession: means an occupation requiring specialised Knowledge and Skill. Vocation: is an activity in which an assessee has specialised skill for earning Income.
  5. 5. Deduction Allowable  1. Rent, Rates, Taxes and Insurance of Building ( u/s 30)  2. Repairs and Insurance of Machinery, Plant and Furniture (u/s 31)
  6. 6. Depreciation (u/s 32)  Following conditions are to be fulfilled.  a) Assessee must be owner of the Asset.  b) Asset must be used for the purpose of business or Profession.  c) Such use must be in the relevant previous year.
  7. 7. Depreciation  Deprecation is allowed in respect of  a) Building  b) Plant & Machinery  c) Furniture  d) Motor Vehicles  e) Computers  f) Intangibles
  8. 8. Depreciation  Depreciation is allowed on the Written Down Value of Block of Assets  Opening WDV XX  Add : Purchases during the year XX  Less : Sales during the year XX  Closing WDV XX  Note : If the Asset is put to use for less than 180 Days in the year, depreciation will be allowed at 50 % of the eligible rate.
  9. 9. Additional Depreciation  Additional Deprecation @ 20 % of Actual Cost of Machinery acquired after 31.03.2002 for  a) New Industrial Undertaking  b) Existing Industrial Undertaking Note : If the Asset is put to use for less than 180 Days in the year, depreciation will be allowed at 50 % of the eligible rate.
  10. 10. Expenditure of Scientific Research U/s 35  Any Expenditure (other than Cost of Land) expended on scientific research related to the business.  Contribution to  i) Association, university, college for the purpose of Scientific Research  ii) National Laboratory  eligible for 175 % Deduction  iii) Association, university, college for the purpose of research in social sciences or statistical research  eligible for 125 % Deduction  In House Research in specified industries eligible for  200 % Deduction
  11. 11. Expenditure for Obtaining License to operate Telecommunication Services U/s 35ABB  Allowed as Deduction equally over the number of years of Validity of Licenses
  12. 12. Other Expenditures  35AC : Expenditure on Eligible Projects  35CCA : Expenditure for carrying out rural development programmes  35 CCB : Expenditure for carrying out programmes of conservation of natural resources.
  13. 13. Amortisation of  Preliminary Exp deduction is allowed in 5 Years ( Section 35D)  Amortisation of Amalgamation or Demerger in 5 Years (Section 35DD)  Amortisation of VRS Expenses in 5 Years  ( Section 35DDA)  Expenditure on Minerals Prospecting in 10 Years (Section 35E)
  14. 14. Other Deduction u/s 36  i) Insurance premium paid to cover the risk of damage or destruction of Stock  Ii) Bonus or Commission paid to Employees  Iii) Interest on Borrowed Capital  iii) Contribution to Recognised Provident Fund  iv) Contribution to Approved Gratuity Fund  V) Write off of useless or Dead Animals  Vi) Bad Debts  Vii) Expenditure on promotion of Family Planning among employees
  15. 15. General Expenses u/s 37  Conditions to be fulfilled  i) Expenditure should not be in the nature prescribed u/s 30 to 36  ii) Not a Capital Expenditure  iii) Not Personal Expenditure  iv) for the purpose of Business
  16. 16. Advertisement Expenses ( Section 37(2B)  Deduction is not allowed in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamplet or like published by a political party.
  17. 17. Disallowance u/s 40a  Interest Royalty Fees for Professional Services paid outside India without deducting TDS
  18. 18. Disallowance us/s 40 a  Payment to Resident without deducting TDs  Following payments are covered  I) Interest  II) commission or Brokerage  III) Rent  Iv) Fees for Technical or Professional Services  V) royalty  VI) Payment to Contractor
  19. 19. Disallowance us/s 40 a  Securities Transaction Tax  Fringe Benefit Tax  Income Tax  Wealth Tax  Salary paid outside India without deducting TDS  Provident Fund payment without deducting TDS  Tax on Prequisites paid by the employer
  20. 20. Disallowance u./s 40 (b)  Amount not Deductible in case of Partnership Firm  I) Interest exceeding the rate specified in the Partnership Deed or 12 % whichever is lower  II) Remuneration to Partner
  21. 21. Remuneration to Partner  Is allowed upto the following limits  First Rs 3,00,000 - 90 % or Rs 1,50000  which ever is high  Balance - 60 %
  22. 22. Disallowance u/s 40 A  Excessive Payment to Relatives  Payment exceeding Rs 20,000 in mode otherwise than Crossed cheque  (Entire amount is disallowed)
  23. 23.  Contribution to Non Statutory Funds  Provision for Unapproved Gratuity Fund
  24. 24. Section 43 B : Deduction on Payment Basis  Following will be allowed as Deduction on actual paid basis.  Outstanding amount has to be paid before Due Date of Filing of Return of Income.  i) Any Tax, Duty paid to government  ii) Contribution to PF  iii) Bonus or Commission  iv) Interest on Loans from financial  institution  V) Interest on Loans from Scheduled Bank  Vi) Leave Salary to Employees
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