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Income from Business &Profession:

Income from business & profession is one of the heads of income under Income Tax. While filing income tax return, the taxpayer must declare the amount of profits and gains of business.

Incomes Chargeable to Profits and Gains of Business or Profession are as below :

  • a) Profit and gains from any business /profession carried at any time during the previous year.

  • b) Compensation or other payment paid or received by any specified person.

  • c) Income from trade, professional or similar association from specific services performed.

  • d) Profit on sale of a license granted under the Imports Control Order 1955, made under the Import Export Control Act, 1947.

  • e) Cash assistance received or receivable by any person against exports under any scheme of Government.

  • f) Duty drawbacks of Customs and Central Excise duties.

  • g) Profit on transfer of Duty Entitlement Pass Book Scheme, under Section 5 of Foreign Trade.

  • h) Duty drawbacks of Customs and Central Excise duties.

  • i) Profit on the transfer of the Duty Free Replenishment Certificate.

  • j) Value of any benefits or perquisites arising from a business or profession.

  • k) Interest, salary, bonus, commission or remuneration due for paid or received by a partner from partnership firm.

  • l) Value received or receivable for not carrying out any activity in relation to any business or profession or any type of i.e. know-how, patent, copyright, trademark, license, franchise, or any other business or commercial right or information or technique likely to assist in the manufacture of goods or provision of services.

  • m) Sum received under a Key man Insurance policy including the sum of bonus on such policy.

  • n) Profit or gains arising from conversion of inventory into capital asset.

  • o) Any value whether received or receivable in cash or kind, on account of any capital asset being demolished, destroyed, discarded or transferred, if the whole of the expenditure on such capital asset has been allowed as a deduction under Section 35AD.

  • According to Section 28, the following are the main clause that requires an income to be charged under profits and gains of business or profession.

  • p) Any liability which is unilaterally written off by the taxpayer from the books of accounts shall be deemed as remission or cessation of such liability and shall be chargeable to tax.

  • q) Depreciable asset in case of power generating units is sold, discarded, demolished or destroyed, the amount by which sale or insurance compensation together with scrap value exceeds its WDV shall be chargeable to tax.

  • r) Where any capital asset used in scientific research is sold without having been used for other purposes and the sale proceeds together with the amount of deduction allowed under sec 35 exceed the amount of the capital expenditure such surplus or the amount of deduction allowed whichever is less, is chargeable to tax as business.

  • s) Bad debts allowed as deduction under Section 36 in earlier years, any recovery of same shall be chargeable to tax.

  • t) Amount withdrawn in previous year from special reserves created and maintained under Sec.36 shall be chargeable to tax.

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