MEANING OF BUSINESS, PROFESSION AND VOCATION, DIFFERENCE BETWEEN BUSINESS, PROFESSION AND VOCATION , MEANING OF SPECULATION BUSINESS , FORMAT FOR COMPUTING TAXABLE INCOME FROM BUSINESS/PROFESSION

1. INCOME FROM BUSINESS OR
PROFESSION

2. MEANING
•Business means any kind of economic activity carried on by
an individual for earning profits.
•Sec. 2(3) has defined the term as “ any trade, commerce,
manufacturing activity or any adventure or concern in the
nature of trade, commerce and manufacture”.
•In this connection it is not necessary that there should be a
series of transactions in a business and also it should be
carried on permanently.

4. PROFESSION
•According to sec. 2(36) of Income Tax Act, “profession”
includes vocation.
•Profession involves the use of intellectual or manual
skill to earn a livelihood
•For instance, an auditor carrying on his practice, the
lawyer or a doctor, a painter, an actor, an architect or
sculptor, would be persons carrying on a profession and
not a business.

5. VOCATION
•Vocation simply means a way of living for which one has
special fitness.
•A vocation does not involve any organized or systematic
activity like business.
•So vocation simply means any type of activity which a person
is passionate about and proceeds from an inner calling or urge
•The practice of a religion may also amount to vocation.
Writing of articles in the magazines is also a vocation.

6. Differences
BASIS BUSINESS PROFESSION VOCATION
MEANING BUSINESS INVOLVES TRADE ,
MANUFACTURE AND COMMERCE
PROFESSION INVOLVES
USE OF PROFESSIONAL
SKILLS AND SPECIALISED
KNOWLEDGE
PROCEEDS FROM
PASSION OR INNER
CALLING
REMUNERATIO
N
PROFITS AND GAINS PROFESSIONAL FEES REMUNERATION
QUALIFICATIO
N
NO MINIMUM QUALIFICATION
REQUIRED
SPECIALISED KNOWLEDGE
AND SKILLS REQUIRED
NATURAL TALENT OR
PASSION
DEALS WITH GOODS AND SERVICES PROFESSIONAL SERVICES INTANGIBLE
DELIVERABLES
CODE OF
CONDUCT
NO PRESCRBED CODE OF
CONDUCT
PRESCRIBED CODE OF
CONDUCT
NO PRESRIBED CODE OF
CONDUCT
OBJECTIVE EARNING PROFITS LIVELIHOOD SATISFACTION,
LIVELIHOOD MEANS

7. FORMAT FOR COMPUTATION
PARTICULARS AMOUNT AMOUNT
NET PROFIT AS PER PROFIT AND LOSS ACCOUNT XXX
ADD: NON-BUSINESS EXPENSES DEBITED TO PROFIT/LOSS
ACCOUNT
XXX
BUSINESS INCOME NOT INCLUDED IN PROFIT/LOSS ACCOUNT XXX
OVERVALUATION OF OPENING STOCK
UNDERVALUATION OF CLOSING STOCK
XXX
NOTIONAL EXPENSES XXX XXXX
LESS:
NON BUSINESS INCOMES CREDITED TO P&L ACCOUNT XXX
BUSINESS EXPENSES NOT INCLUDED IN P&L ACCOUNT
UNDER VALUATION OF OPENING STOCK
OVER VALUATION OF CLOSING STOCK
TAXABLE INCOME FROM BUSINESS
XXX
XXX
XXXXX