Sunday, 14 April 2013

Inocme from Business Profession

The income referred to in section 28, i.e., the incomes chargeable as "Income from Business or Profession" shall be computed in accordance with the provisions contained in sections 30 to 43D. However, there are few more sections under this Chapter, viz., Sections 44 to 44DA (except sections 44AA, 44AB & 44C), which contain the computation completely within itself. Section 44C is a dis-allowance provision in the case non-residents. Section 44AA deals with maintenance of books and section 44AB deals with audit of accounts.
In summary, the sections relating to computation of business income can be grouped as under

  1. Deductible Expenses - Sections 30 to 38 [except 37(2)].
  2. Inadmissible Expenses - Sections 37(2), 40, 40A, 43B & 44-C.
  3. Deemed Incomes - Sections 33AB, 33ABA, 33AC, 35A, 35ABB & 41.
  4. Special Provisions - Sections 42 & 43D
  5. Self-Coded Computations - Sections 44, 44A, 44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB, 44-D & 44-DA.
The computation of income under the head "Profits and Gains of Business or Profession" depends on the particulars and information available.
If regular books of accounts are not maintained, then the computation would be as under: -
Income (including Deemed Incomes) chargeable as income under this head xxx Less: Expenses deductible (net of disallowances) under this head xxx Profits and Gains of Business or Profession xxx
However, if regular books of accounts have been maintained and Profit and Loss Account has been prepared, then the computation would be as under: -
Net Profit as per Profit and Loss Account                                     xxx
Add : Inadmissible Expenses debited to Profit and Loss Account                xxx
      Deemed Incomes not credited to Profit and Loss Account                  xxx
                                                                              xxx 
Less: Deductible Expenses not debited to Profit and Loss Account          xxx
      Incomes chargeable under other heads credited to Profit & Loss A/c  xxx
                                                                              xxx
Profits and Gains of Business or Profession                                   xxx

Refer to income tax notifications for amendments to various sections of IT Act.

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