INCOME FROM BUSINESS

1. INCOME FROM BUSINESS
BY
SRIDHARA G
M.COM, NET, KSET, (Ph.d)

2. PROFITS AND GAINS FROM BUSINESS
AND PROFESSION
 Profits : Excess income over expenditure.
 Gains : Any incidental revenue from business.
 As the rules for the assessment of business, profession
or vocation are the same, there is no importance of
making any distinction between them for income tax
purposes.

3. INCOME FROM BUSINESS AND PROFESSION-
UNDER THE INCOME TAX ACT, 1961
MEANING OF BUSINESS : SEC 2(13)
BUSINESS MEANS ANY ECONOMIC ACTIVITY
CARRIED ON FOR EARNING PROFITS. IT INCLUDES,
 TRADE
 COMMERCE
 MANUFACTURE
 ANY ADVENTURE OR CONCERN IN THE NATURE
OF TRADE, COMMERCE OR MANUFACTURE.

4. TO JUDGE A TRANSACTION AS BUSINESS
TRANSACTION, FOLLOWING POINTS SHOULD
BE CONSIDERED
 1. Nature of commodity
 2. Nature of transaction (Whether incidental to a
business or not)
 3. Intention of the related party
 4. Duration of transaction
 5. Effort applied in transaction.

5. MEANING OF PROFESSION: SEC 2(36)
A PROFESSION IS AN OCCUPATION REQUIRING PURELY
INTELLECTUAL SKILL OR MANUAL SKILL.
 E.g. LAWYER, ACCOUNTANT, ENGINEER, DOCTOR,
AUTHOR.
 IT ALSO INCLUDES VOCATION.
VOCATION : VOCATION IMPLIES NATURAL ABILITY OF A
PERSON TO DO SOME PARTICULAR WORK E.G. SINGING,
DANCING, ETC. HERE, NO TRAINING OR NO
QUALIFICATION IS REQUIRED BUT HAVING NATURAL
ABILITY.

6. INCOME FROM BUSINESS & PROFESSION
KEY POINTS :
 MUST BE CARRIED ON BY ASSESSEE.
 MUST BE CARRIED ON DURING THE PREVIUOS YEAR.
 ONLY PROFIT OF THE PREVIOUS YEAR ARE TO BE TAXED.
 INCOME INCLUDES NEGATIVE INCOME i.e. loss.
 THERE IS NO DIFFRENCE BETWEEN LEGAL AND ILLEGAL BUSINESS FOR
TAXATION PURPOSE. EVEN INCOME FROM ILLEGAL BUSINESS SHALL BE
TAXABLE.
 A PERSON CANNOT DO BUSINESS WITH ONE SELF.HENCE NOTIONAL
PROFIT IS NOT TAXABLE. IF A PROPRIETOR WITHDRAWS GOODS
COSTING RS.50000 FOR PERSONAL USE AT AN AGREED VALUE OF
RS.60000 THEN PROFIT OF RS.10000 SHALL NOT BE TAXABLE.