The document discusses two methods of computing business income - the direct method and indirect method.
The direct method involves directly computing income chargeable less allowable expenses. The indirect method involves adjusting net profit to add disallowed expenses and deduct allowed expenses and incomes not considered.
Several allowable and disallowed expenses are listed such as rent, depreciation, insurance, salaries, interest, taxes, penalties, personal expenses, capital expenses etc.
An example computation of business income using the indirect method is provided for a firm, showing the calculation of net profit as per accounts, adjustments for disallowed and allowed items, and arriving at income from business.
This PPT contains the details regarding Introduction to Income Tax. It will be useful to all the viewers. It Contains the following points, viz., 1. Meaning of Income Tax 2. Five Heads of Income 3. Sources of Income Tax Law 4. Income Tax Act, 1961 5. Income Tax Rules, 1962 6. Circulars by CBDT 7. Judicial Decisions 8. Annual Finance Act 9. Basis of Charge of Income Tax 10. Person 11. Assessee - Definition 12. Types of Assessee 13. Assessment - Definition 14. Assessment Year - Definition 15. Previous Year - Definition 16. Provisions regarding Previous Year 17. Discontinued Business 18. When Previous Year and Assessment Year will be same? 19. Previous Year Vs. Assessment Year 20. Income 21.Features of Income
Meaning of agricultural Income, Examples, Non Agricultural Income , Is Agricultural Income taxable? Case study, Examples of Agricultural Income and Non-Agricultural Income
This PPT contains the details regarding Introduction to Income Tax. It will be useful to all the viewers. It Contains the following points, viz., 1. Meaning of Income Tax 2. Five Heads of Income 3. Sources of Income Tax Law 4. Income Tax Act, 1961 5. Income Tax Rules, 1962 6. Circulars by CBDT 7. Judicial Decisions 8. Annual Finance Act 9. Basis of Charge of Income Tax 10. Person 11. Assessee - Definition 12. Types of Assessee 13. Assessment - Definition 14. Assessment Year - Definition 15. Previous Year - Definition 16. Provisions regarding Previous Year 17. Discontinued Business 18. When Previous Year and Assessment Year will be same? 19. Previous Year Vs. Assessment Year 20. Income 21.Features of Income
Meaning of agricultural Income, Examples, Non Agricultural Income , Is Agricultural Income taxable? Case study, Examples of Agricultural Income and Non-Agricultural Income
OBJECTIVE
Goods and Services Tax (GST) is an Indirect Tax levied in India introduced in July, 2017 which was one of the most important reforms in the Indian Economy. Unlike erstwhile indirect tax regime, GST promises seamless credit on goods and services across the entire supply chain with some exceptions. In this webinar, we shall understand and analyse the provisions related to Input Tax Credit under the GST law
Types of Assessment in GST-
Self Assessment
Provisional Assessment
Scrutiny of Returns
Assessment of Non-filers
Assessment of Unregistered persons
Summary Assessment
Concept & Nature of supply under GST LawArpit Verma
Chapter III of Central Goods and Services Tax Act, 2017 & Integrated Goods and Services Tax Act, 2017 contains the provision of levy and collection of GST.
The expression “Supply” is defined under section 7(1) of Central Goods and Services Tax Act, 2017.
There is no such proposition in the existing laws as the concept of supply is unique to our tax system and considered as a ‘taxable event’ for the first time in indirect tax regime.
Read My Full Article on Concept & Nature of Supply Under GST.
This is a short presentation for beginners wanting to learn a bit about the Indian Income-tax Act. It gives a snapshot of some of the basic terms in the Indian income-tax law. Hard core tax practitioners may kindly stay away! It's only the common man.
Lecture notes on scope of total income and residental status under income ta...Dr. Sanjay Sawant Dessai
Lecture notes prepared for the students of Income tax , based on Income tax Act of India 1961. topic covered are Residential status and scope of total income of assessee.
Accounting for Not for Profit OrganisationsPreksha Mehta
In this presentation, you will find notes , accounting treatment and practical questions on the unit Financial Statements of not for profit organisations.
OBJECTIVE
Goods and Services Tax (GST) is an Indirect Tax levied in India introduced in July, 2017 which was one of the most important reforms in the Indian Economy. Unlike erstwhile indirect tax regime, GST promises seamless credit on goods and services across the entire supply chain with some exceptions. In this webinar, we shall understand and analyse the provisions related to Input Tax Credit under the GST law
Types of Assessment in GST-
Self Assessment
Provisional Assessment
Scrutiny of Returns
Assessment of Non-filers
Assessment of Unregistered persons
Summary Assessment
Concept & Nature of supply under GST LawArpit Verma
Chapter III of Central Goods and Services Tax Act, 2017 & Integrated Goods and Services Tax Act, 2017 contains the provision of levy and collection of GST.
The expression “Supply” is defined under section 7(1) of Central Goods and Services Tax Act, 2017.
There is no such proposition in the existing laws as the concept of supply is unique to our tax system and considered as a ‘taxable event’ for the first time in indirect tax regime.
Read My Full Article on Concept & Nature of Supply Under GST.
This is a short presentation for beginners wanting to learn a bit about the Indian Income-tax Act. It gives a snapshot of some of the basic terms in the Indian income-tax law. Hard core tax practitioners may kindly stay away! It's only the common man.
Lecture notes on scope of total income and residental status under income ta...Dr. Sanjay Sawant Dessai
Lecture notes prepared for the students of Income tax , based on Income tax Act of India 1961. topic covered are Residential status and scope of total income of assessee.
Accounting for Not for Profit OrganisationsPreksha Mehta
In this presentation, you will find notes , accounting treatment and practical questions on the unit Financial Statements of not for profit organisations.
salaries, income from salaries, taxable salaries, employer, employee, advnace salary, arrears of salary, bonus, tds, tax deducted at source,
profit in lieu of salary, dearness allowance, allownaces, provident fund, perquisites, medical treatment, entertainment allowance,
professional tax, tax on employment,
PRACTICAL TRAINING ON INDIRECT AND DIRECT TAXATION .This presentation will help you learn about a part of indirect tax ( VAT , COMPOSITE SCHEME, REGISTRATION PROCEDURE , STDS ETC.)
This document summarises key features of Budget Proposal of Indan Union Budget 2018 including Budget Financial, Key Policy Announcement, Income Tax, Goods & Service Tax (GST), Excise and Customs
This material is for PGPSE / CSE students of AFTERSCHOOOL. PGPSE / CSE are free online programme - open for all - free for all - to promote entrepreneurship and social entrepreneurship PGPSE is for those who want to transform the world. It is different from MBA, BBA, CFA, CA,CS,ICWA and other traditional programmes. It is based on self certification and based on self learning and guidance by mentors. It is for those who want to be entrepreneurs and social changers. Let us work together. Our basic idea is that KNOWLEDGE IS FREE & AND SHARE IT WITH THE WORLD
This material is for PGPSE / CSE students of AFTERSCHOOOL. PGPSE / CSE are free online programme - open for all - free for all - to promote entrepreneurship and social entrepreneurship PGPSE is for those who want to transform the world. It is different from MBA, BBA, CFA, CA,CS,ICWA and other traditional programmes. It is based on self certification and based on self learning and guidance by mentors. It is for those who want to be entrepreneurs and social changers. Let us work together. Our basic idea is that KNOWLEDGE IS FREE & AND SHARE IT WITH THE WORLD
Dividends, Winning from Lotteries, Interest on Securities, Keyman Insurance Policy, subletting of house property, family pension, interest on bank deposit, interest on loan given, rent from vacant plot of land, agriculture income, interest on income tax refund, post office saving certificates, gift, gift received from relatives,
non taxable income, exempt income, agriculture income, share of profit from a partnership firm,
leave travel concession, gratuity, pension, leave salary encashment, maturity of LIC, public provident fund,
house rent allownace, conveyance allowance, tribal area allowance, remote area allownace, children eduction allowace,
children hostel allownace, transport allowance, scholarship, award from government,income of minor child, dividend,
house property, income from house property, let out property, vacant let out property, self occupied property, deemed let out property,
lop, vlop, sop, dlop, gross annual value, gav, reasonable letting value, rlv, municipal rateable value, mrv, starndard rent,
actual rent received, arr, municipal tax, deduction u/s 24, standard deduction, interest on loan, pre construction interest,
post construction interest, unrealised rent, arrears of rent, co-ownership, deemed owners, composite rent,
Capital Asset
Transfer
Types of capital assets
Short term capital asset
Long term capital asset
Short term capital gain
Long term capital gain
Computation of capital gain
Computation of short term capital gain
Computation of long term capital gain
FMV = Sales Consideration
Expenses on transfer
Cost inflation index
CII
Cost of previous owner
Cost of converted share or debenture
COA in case of depreciable assets
FMV as on 1/4/1981
Indexed cost of acquisition
Cost of acquisition
Cost of improvement
Indexed cost of improvement
Different cases of indexation
Exemption u/s 54
Purchase of new house
Exemption u/s 54ec
Investment in bonds
Capital asset into stock in trade
Residential status of Individual, Basic Conditions, Additional condition, Steps to calculate residential status of an Individual, Problem and solution of Q.1, Residential status of Hindu Undivided Family, Residential status of a Company, Residential status of Firm/ Association of Person/ Body of Individual/ Local Authority/ Artificial Juridical Person.
Person, Individual, Hindu Undivided Family, Company, Partnership Firm, Association of Person, Body of Individual, Local Authority, Artificial Juridicial Person, Income, Assessee, Assessment, Assessment Year, Previous Year.
Tax Laws
Scope of Study
Scheme of Act
What is Income Tax?
Extends to Whole of India
Modules at a Glance
Modules in Brief
Match the Columns
True of False
Multiple Choice Questions
Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
Biological screening of herbal drugs: Introduction and Need for
Phyto-Pharmacological Screening, New Strategies for evaluating
Natural Products, In vitro evaluation techniques for Antioxidants, Antimicrobial and Anticancer drugs. In vivo evaluation techniques
for Anti-inflammatory, Antiulcer, Anticancer, Wound healing, Antidiabetic, Hepatoprotective, Cardio protective, Diuretics and
Antifertility, Toxicity studies as per OECD guidelines
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
Model Attribute Check Company Auto PropertyCeline George
In Odoo, the multi-company feature allows you to manage multiple companies within a single Odoo database instance. Each company can have its own configurations while still sharing common resources such as products, customers, and suppliers.
Francesca Gottschalk - How can education support child empowerment.pptxEduSkills OECD
Francesca Gottschalk from the OECD’s Centre for Educational Research and Innovation presents at the Ask an Expert Webinar: How can education support child empowerment?
Palestine last event orientationfvgnh .pptxRaedMohamed3
An EFL lesson about the current events in Palestine. It is intended to be for intermediate students who wish to increase their listening skills through a short lesson in power point.
2. 1st Method
Pick-N-Choose method/ Direct method
(Cash book, Bank book, Receipt & Payment A/C, Pointwise, Paragraph Wise )
Format:
Income Chargeable XX
Less : Allowable Expenses (XX)
Income From Profession XX
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3. 2nd Method
Reverse method/ Indirect method
(P&L A/C, Income & Expenditure A/C)
Format:
Net profit as per P&L A/C (Question) XX
Add : Disallowable Expenses (P&L A/C – Dr.) XX
XX
Less : Allowable Expenses (Adjustment) (XX)
XX
Add : Income Chargeable (Adjustment) XX
XX
Less : Income not Chargeable (P&L A/C – Cr.) (XX)
Income From Business XX
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4. Allowable Expenses
1. Rent, Rates, Repairs, Insurance & Taxes of Building u/s 30
2. Repairs and Insurance of Plant, Machinery & Furniture u/s 31
3. Depreciation u/s 32
4. Insurance premium on stock in trade u/s 36(1)(i)
5. Insurance premium paid by Federal milk co-op society on the lives of cattle
u/s 36(1)(ia) [Livestock]
6. Premium paid by employer for medical insurance on the health of his
employees u/s 36(1)(ib) { if paid by cheque }
7. Bonus & commission to employees u/s 36(1)(ii) { on actual payment basis }
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5. Allowable Expenses
8. Interest on borrowed capital (i.e, loan) u/s 36(1)(iii) { paid or payable }
9. Employers contribution to recognised provident fund or approved
superannuation Fund u/s 36(1)(iv) { on actual payment basis }
10. Contribution to approved gratuity fund u/s 36(1)(v) {on actual payment basis }
11. Employees contribution to provident fund u/s 36(1)(va) [Once deducted then
by default added to net profit, claim for deduction if deposited before due
date]
12. Write off allowance for animals u/s 36(1)(vi) [Loss on sale of Livestock]
13. Bad Debts u/s 36(1)(vii)
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6. Allowable Expenses
14. Family planning expenditure u/s 36(1)(ix)
15. General Deduction u/s 37(1)
a. Such expenditure should not be specifically covered u/s 30 to 36 (ie. Point
no -1 to 14 of allowable expenses)
b. It should be incurred for the purpose of business or profession
c. It should be revenue exp. & not capital exp.
d. It should not be personal exp.
e. It should not be in the nature of penalties for breaking any laws.
f. Such business or profession should be continued in current year.
g. Expense incurred by the assessee in the previous year.
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7. Disallowable Expenses
1. Advertisement expenses in relation to a political party u/s 37(2B)
2. Building, plant & machinery or furniture not used for business u/s 38
3. Taxes & TDS u/s 40(a)
4. Any remuneration, salary, bonus, commission paid to partner by his
partnership firm u/s 40(b)
5. Excessive payment made to specified person u/s 40A(2)
{Relative or Person having substantial interest i.e, holding at least 20% voting
power}
6. Expenses paid in cash in excess of Rs. 20,000 u/s 40A(3) {100% Disallowed}
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8. Disallowable Expenses
6. Provision for unapproved gratuity fund u/s 40A(7)
7. Contribution to URPF & Superannuation fund u/s 40A(9,10,11)
8. Deduction on Actual payment basis u/s 43B
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9. By Sales 20,00,000
By Closing Stock 85,000
________
20,85,000
By Gross Profit 5,10,000
By Bad debts recovery 15,000
_______
5,25,000
To Opening Stock 75,000
To Purchase 15,00,000
To Gross Profit 5,10,000
________
20,85,000
To Salaries 2,50,000
To Commission 40,000
To Sales Tax 35,000
To General Exp 5,000
To Advance Income Tax 54,000
To Interest on Capital 42,000
To Depreciation on Furniture 4,000
To Advertisement 16,000
To Free distribution of samples 3,000
To Insurance premium on life of partners 8,500
To Printing & Stationery 3,500
To Net Profit 46,000
5,25,000
Particulars Rs. Particulars Rs.
Nakul and Sahadev are partners of M/s Bharat Sales and Service. Following information has been provided:
Dr. Trading & Profit and Loss A/c for the year ended 31st
March, 2017 Cr.
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10. Following additional information has been provided:
1. Salaries include Rs.40,000 paid to partners, as per partnership deed and well within the limit u/s 40(b).
2. General expenses are incurred for the purpose of pleasure tour of partners with their family members to
Goa.
3. Income Tax paid includes Rs.14,000 paid as tax on behalf of partners.
4. Bad debts recovered were earlier allowed as a deduction.
5. Interest on capital to partners is in excess of limits specified u/s 40(b) by Rs.1,500 but as per partnership
deed.
On the basis of the information given above compute the taxable income of the firm for the assessment year
2017-18.
Solution:
Name of Assessee : M/s Bharat Sales & Services
Assessment Year : 2017-18
Previous Year : 2016-17
Status : Firm
Residential Status : R & OR
PAN No : ___________
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11. Indirect Method:
Net profit as per P & L A/c 46,000
Add: Disallowable Expenses
1. General Expenses 5,000
2. Income Tax (Advance) 54,000
3. Interest on Capital 1,500
4. Insurance premium on life of partners 8,500 69,000_
1,15,000
Less: Allowable Expenses NIL____
1,15,000
Add: Income Chargeable NIL____
1,15,000
Less: Income Not Chargeable NIL____
Income From Business 1,15,000_
Note:
Any payments of Salary, Bonus, Commission or Remuneration paid to a working partner, if authorised by the partnership deed
and such amounts are within the limits as specified u/s 40(b) shall be allowed as deduction in the computation of Income of firm.
Computation of Income from Business
Particular Rs Rs
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12. To Salaries 1,65,000
To Office Expenses 18,000
To Depreciation 14,000
To Sales Tax 9,000
To Legal Expenses 8,000
To Income Tax 7,000
To Patents Purchase 12,000
To Repairs 6,000
To Donation 2,000
To Provision for Bad Debts 3,000
To General Expenses 12,000
To Net Profit 44,000
3,00,000
By Gross Profit 2,50,000
By Bad Debts recovered 10,000
By Dividend 3,000
By Rent from House Property 9,000
By Commission 10,000
By Brokerage 10,000
By Sundry Receipts 5,000
By Share of Income from HUF 3,000
_______
3,00,000
Particulars Rs. Particulars Rs.
Following is the Profit & Loss A/c of Mr. Ranjith for the year ending 31.03.2017:
Dr. Profit and Loss A/c for the year ended 31st
March, 2017 Cr.
Additional Information:
1. Salaries include Rs.6,000 paid to workers employed at home.
2. Legal Expenses include Rs.1,000 paid to the advocate in connection with personal case.
3. General Expenses include Rs.4,000 as contribution to Staff Welfare Fund.
4. Out of the Bad Debts recovered only Rs.4,000 were allowed as deduction earlier.
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13. Indirect Method:
Net profit as per P & L A/c 44,000
Add: Disallowable Expenses
1. Salaries 6,000
2. Legal Expenses 1,000
3. Income Tax 7,000
4. Patents Purchased 12,000
5. Donation 2,000
6. Provision for Bad Debts 3,000 31,000
75,000
Less: Allowable Expenses NIL
75,000
Add: Income Chargeable NIL
75,000
Less: Income Not Chargeable
1. Bad Debts recovered 6,000
2. Dividend 3,000
3. Rent from House Property 9,000
4. Share of Income from HUF 3,000 21,000
Income from Business 54,000
Computation of Income from Business
Particular Rs Rs
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14. To Balance b/d:
Cash in hand 1,500
Cash at bank 3,000 4,500
To Consulting fees 1,85,000
To Visit fees 44,500
To Gift from patients 6,000
To Winning from horse races 10,000
______
2,50,000
By Salaries 44,000
By Bonus to staff 4,400
By P & Stationery 13,600
By Rent of Clinic(Paid to Wife) 12,000
By Electricity 11,150
By Car Expenses 30,000
By Drawings 48,000
By Donations 18,000
By Purchase of Equipment 12,000
By Misc. Expenses 12,000
By Balance c/d
Cash in hand 2,600
Cash at bank 42,250 44,850
________
2,50,000
Receipts Rs. Payments Rs.
Following is the Account of receipt and payment of Dr. Doshi of Manas Clinic
Dr. Receipt & Payment A/c for the year ended 31st
March, 2017 Cr.
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15. Adjustment:
1. Rs.6,000 is considered as a reasonable rent of the clinic.
2. Misc. expenses are incurred for personal purposes.
3. Donation are eligible for deduction u/s 80G
4. Half of the car expenses are for personal use.
5. Depreciation allowable according to Income Tax Act is Rs.4,000
Compute the Income from Profession of Dr. Doshi for the Assessment Year 2017-18
Solution:
Name of the Assessee : Dr. Doshi
Assessment Year : 2017-18
Previous Year : 2016-17
Status : Individual
Residential Status : R & OR
PAN No : ________
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16. Direct Method:
Income Chargeable:
1. Consulting fees 1,85,000
2. Visit fees 44,500
3. Gifts from patients 6,000 _
2,35,500
Less: Allowable Expenses:
1. Salaries 44,000
2. Bonus to staff 4,400
3. Printing & Stationery 13,600
4. Rent of Clinic 6,000
5. Electricity 11,150
6. Car Expenses (Rs.30,000 X ½) 15,000
7. Depreciation 4,000 (98,150)
Income From Profession 1,37,350
Computation of Income from Business
Particular Rs Rs
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17. Note:
1. Only reasonable rent is allowed as business expenditure.
2. Personal expenses are not allowed.
3. Donations are not the expenses of business. However, necessary deduction will
be allowed u/s 80G from Gross Total Income.
4. Purchase of equipments being capital expenditure not allowed as deduction.
5. Winning from Horse Races will be considered under the head, Income from
Other Sources.
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