Presentation on theme: "Profits and Gains of Business or Profession"— Presentation transcript:
1 Profits and Gains of Business or Profession Lecture Notes
2 Basis of Charge (Section 28) Following Incomes shall be charged to tax under this head1. Profit and Gains of any business or Profession carried on by the assessee2. 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 agency3. 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 profession6. 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 fora) not carrying out any activityb) not sharing any knowhows, patent etc.8. Sum Received under Keyman Insurance Policy9. 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 Allowable1. 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 ofbusiness or Profession.c) Such use must be in the relevant previousyear.
7 Depreciation Deprecation is allowed in respect of a) Building b) Plant & Machineryc) Furnitured) Motor Vehiclese) Computersf) Intangibles
8 DepreciationDepreciation is allowed on the Written Down Value of Block of AssetsOpening WDV XXAdd : Purchases during the year XXLess : Sales during the year XXClosing WDV XXNote : 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 20 % of Actual Cost of Machinery acquired after fora) New Industrial Undertakingb) Existing Industrial UndertakingNote : 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 toi) Association, university, college for the purpose of Scientific Researchii) National Laboratoryeligible for 175 % Deductioniii) Association, university, college for the purpose of research in social sciences or statistical researcheligible for 125 % DeductionIn House Research in specified industries eligible for200 % 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 programmes35 CCB : Expenditure for carrying out programmes of conservation of natural resources.
13 Amortisation ofPreliminary 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 36i) Insurance premium paid to cover the risk of damage or destruction of StockIi) Bonus or Commission paid to EmployeesIii) Interest on Borrowed Capitaliii) Contribution to Recognised Provident Fundiv) Contribution to Approved Gratuity FundV) Write off of useless or Dead AnimalsVi) Bad DebtsVii) 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 36ii) Not a Capital Expenditureiii) Not Personal Expenditureiv) 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 40aInterest 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 coveredI) InterestII) commission or BrokerageIII) RentIv) Fees for Technical or Professional ServicesV) royaltyVI) Payment to Contractor
19 Disallowance us/s 40 a Securities Transaction Tax Fringe Benefit Tax Income TaxWealth TaxSalary paid outside India without deducting TDSProvident Fund payment without deducting TDSTax on Prequisites paid by the employer
20 Disallowance u./s 40 (b)Amount not Deductible in case of Partnership FirmI) Interest exceeding the rate specified in the Partnership Deed or 12 % whichever is lowerII) Remuneration to Partner
21 Remuneration to Partner Is allowed upto the following limitsFirst Rs 3,00, % or Rs 1,50000which ever is highBalance %
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 governmentii) Contribution to PFiii) Bonus or Commissioniv) Interest on Loans from financialinstitutionV) Interest on Loans from Scheduled BankVi) Leave Salary to Employees