Professional Documents
Culture Documents
OR PROFESSION
Sec. 2(13) defines business to include any trade, commerce or manufacture or any adventure or
concern in the nature of trade, commerce or manufacture.
Sec. 2(36) defines profession to include vocation. i.e. income earned not on the basis of
professional degree but also on the basis of inborn talent.
Method of accounting
Sec.145, income under this head shall be computed in accordance with the method of accounting
regularly followed by the assessee.
The two recognized methods are Cash system and mercantile system of accounting.
CHARGEABILITY Sec. 28
1. Profits or gains of any business or profession carried on by the assessee at any time
3. Any profit on transfer of duty entitlement pass book scheme/replenishment certificate.
4. Any interest salary, bonus due to or received by a partner of a firm from such firm.
5. Any compensation or other payment due to or received by a person in connection with:-
SPECULATION BUSINESS
Where an assessee carries on speculative transactions which constitute a business, such business
shall be considered as a separate and distinct business.
Speculation transaction mean a transaction in which a contract for purchase or sale of any
commodity including stocks and shares is periodically or ultimately settled otherwise than by
actual delivery or transfer of the commodity or scrips
COMPUTATION OF INCOME
Advance money, being paid for set up a new business which has not
commenced.
ADMISSIBLE DEDUCTIONS
(a) Rent of a building (land revenues, repairs, insurance pre.) excluding capital nature expenses.
DEPRECIATION U/S 32
CONDITIONS:
BLOCK OF ASSETS
Assets which are of same group in terms of rate of depreciation and nature both.
COST OF ASSET
It includes actual cost of acquisition of asset to bring it to that location and also interest up to the
date of first use less any amt. reimbursed by any person.
The steps as stated above for calculation of WDV are same except “Net sale
considerationâ€.
CALCULATION OF DEPRECIATION
2. In case where the asset used for less than 180 days then depreciation will be charged at half
of the specified rate
ADDITIONAL DEPRECIATION
2. Acquired and Estabilished a new plant or machinery after 31 March, 2005.
- Ships/planes
UNABSORBED DEPRECIATION
1. If the amt. of depreciation cannot be adjusted in the previous year total income other than
income from salary, such amt. of depreciation is known as unabsorbed depreciation.
2. This amt. may be set off from income of next year other than salary.
2. In case such asset sold in any year, then the balance will charged as terminal depreciation.
3. In the following cases terminal depreciation/balancing will be treated as short term capital
loss/gain :
4. Balancing charge : In case there is profit on transfer of above asset then up to the WDV of
such asset will be taxable and over the same will STCG.
Building :
Intangible asset
TEA/COFFEE/RUBBER DELEVOPMENT A/c u/s 33AB
1. Assessee engaged in the production and growing of tea, rubber, coffee in India.
- NABARD
3. The amt. should be deposited within six months from the end of previous year or prior to
filing of return whichever is earlier.
(whichever is less)
5. The said amt. deposited must be utilized only for the specified purpose, otherwise taxable.
6. In case where the business has been closed then any amt. withdrawn from will be taxable .
8. If any asset purchased but sold within the year of sale.
EXPENSES ON SCIENTIFIC RESEARCH U/S 35
REVENUE EXPENSES
- Any exp. Incurred before 03 yrs. from the commencement of business is deductible in the
previous year of business started (salary & material expenses)
CAPITAL EXPENSES
- These exp. are deductible whether such asset utilized or not in the same year.
DONATION TO OUTSIDERS
- assesee to the outsiders will be allowed at 1.25 times of the amt. contributed
- it is not mandatory that such exp. must be related to his own business.
Engaged in the production or mfg. of drugs, computer or any other specified product.
In case of inadequate profits or loss then only capital nature expenses will be
carried forward as like depreciatiousin.
Any expenses of capital nature will be deductible in equal installments as per licence
period.
If such exp. incurred before commencement of business then for the balance period
deduction will be allowed.
- If sale consideration is less than unabsorbed expenses then balance will be allowed as
deduction.
- If sale consideration is resulted in profit then will taxable under this head.
Any institution or association approved before Mar.1983 for the above purpose then any
contribution will be deductible.
Deduction :
Non-corporate assesee
Deduction will be allowed from the year in which the project completed or
business commenced.
Share issue expenses (not bonus issue) will always preliminary expenses.
1. INSURANCE PREMIUM : if actually paid for stock or other loss for business purpose.
2. Health insurance premium paid for their employees if in any form other than cash.
4. Interest on capital borrowed which used for business is deductible if actually paid.
5. Amt. borrowed for payment of direct tax, interest thereon is not deductible.
8. Employees own contribution will be taxable in the hands of employer if the same will not
deposited within specified date.
9. Amt. of bad debt written off as irrecoverable, the business must be continued.
- But where such expenses are of capital nature then deduction allowed in five equal
installments.
13. Advertisement exp. made in the brochure, books published by the political parties are not
allowed as deduction.
14. Banking cash transaction tax(BCTT), Goods transaction tax, Security transaction tax
(STT) is business exp. and deductible from A.Y.2009-10.
(maximum Rs.20000)
Fringe benefit tax(FBT), Income Tax. Wealth tax, are not deductible.
Note : the following are not under the ambit of this section :
1. When the amt. of invoice is not over Rs.20000 but total amt. paid over Rs.20000.
Provision made towards payment for gratuity fund will not be deductible and in case where
payment made towards approved gratuity fund.
1. This section is applicable when books are kept on due basis.
- Payment made in the p.y. or before the date of filing return.
3. This rule is applicable in case where deduction are allowed on actual payment basis.
4. Date of filing return in case of audit – 30 Sep. otherwise 31 July.
DEEMED PROFITS
1. Any amt. recovered during the previous year which earlier allowed as deduction will be
taxable in the year of receipt.
2. If any amt. recovered which earlier allowed as deduction can be set-off with unabsorbed loss
of business subject to the following conditions :
- Business loss can be set off only of the year of business terminated.
- It can be set off also when the return of loss has not filed in time.
1. PROFESSION
– if the gross receipt is more than Rs.150000 in any previous year out of three pre. Year, or
– In case new established profession gross receipt will be more than Rs.150000.
2. BUSINESS
- Income over Rs.120000 or the turnover exceeds Rs. ten lakh in any previous year out of
preceding three years or
- In case new estabilished business gross receipts or turnover will be more than the aforesaid
limit.
1. Where the gross receipts are more or equal to Rs.40 lac
2. In case of profession, where gross receipt more or equal to Rs.10 lac
3. Where the assessee claim that his total income is less than specified u/s 44AD. 44AE, 44AF.
1. Civil construction includes construction or repairs of dam, bridge, building etc.
1. Applicable on those person does not own more than 10 trucks in the previous year.
2. In case heavy goods vehicle then @3500/= p.m. and for others @ Rs.3150/= p.m. per
vehicle.
3. Heavy goods vehicles mean to weight more than 12000 kgs.
4. No further deduction will be allowed in case sec. 44AD is applied.
Source : OWN -