This document provides an overview of income from business and profession under the Income Tax Act. It discusses the various types of income that are taxed under this head, allowable deductions like rent, depreciation, scientific research expenditures, and disallowances. Key points include that income from any business, profession or vocation is taxed, various expenditures are deductible, depreciation is allowed on written down value of blocks of assets, and certain payments must be made by due date to claim deductions.

1. Income From Business and
Profession
Lecture 12

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. 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. 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. 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. 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. Depreciation
• Deprecation is allowed in respect of
• a) Building
• b) Plant & Machinery
• c) Furniture
• d) Motor Vehicles
• e) Computers
• f) Intangibles

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. 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. 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. 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. 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. 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. 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. 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. 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. Disallowance u/s 40a
• Interest Royalty Fees for Professional Services
paid outside India without deducting TDS

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. 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. 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. 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. 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. • Contribution to Non Statutory Funds
• Provision for Unapproved Gratuity Fund

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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