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    Unit 4 Profits and Gainsfrom Bus or Profession

    Uploaded by

    Sahana Sadanand
    Taxable Income from Profession = Professional Receipts - Allowable Deductions B. Allowable Deductions: 1. Salaries 2. Rent, Rates, Taxes 3. Repairs 4. Insurance 5. Bad Debts 6. Depreciation 7. Other Expenses C. Net Profit as per P&L A/c D. Add: Non-allowable expenses debited to P&L A/c E. Less: Allowable expenses not debited to P&L A/c F. Taxable Income from Profession 11 Excellence and Service CHRIST Deemed to be University

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    Unit 4 Profits and Gainsfrom Bus or Profession

    Uploaded by

    Sahana Sadanand
    23 views11 pages
    Taxable Income from Profession = Professional Receipts - Allowable Deductions B. Allowable Deductions: 1. Salaries 2. Rent, Rates, Taxes 3. Repairs 4. Insurance 5. Bad Debts 6. Depreciation 7. Other Expenses C. Net Profit as per P&L A/c D. Add: Non-allowable expenses debited to P&L A/c E. Less: Allowable expenses not debited to P&L A/c F. Taxable Income from Profession 11 Excellence and Service CHRIST Deemed to be University

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    Unit 4 Profits and gainsfrom bus or profession(2)

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    Taxable Income from Profession = Professional Receipts - Allowable Deductions B. Allowable Deductions: 1. Salaries 2. Rent, Rates, Taxes 3. Repairs 4. Insurance 5. Bad Debts 6. Depreciation 7. Other Expenses C. Net Profit as per P&L A/c D. Add: Non-allowable expenses debited to P&L A/c E. Less: Allowable expenses not debited to P&L A/c F. Taxable Income from Profession 11 Excellence and Service CHRIST Deemed to be University

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    23 views11 pages

    Unit 4 Profits and Gainsfrom Bus or Profession

    Uploaded by

    Sahana Sadanand
    Taxable Income from Profession = Professional Receipts - Allowable Deductions B. Allowable Deductions: 1. Salaries 2. Rent, Rates, Taxes 3. Repairs 4. Insurance 5. Bad Debts 6. Depreciation 7. Other Expenses C. Net Profit as per P&L A/c D. Add: Non-allowable expenses debited to P&L A/c E. Less: Allowable expenses not debited to P&L A/c F. Taxable Income from Profession 11 Excellence and Service CHRIST Deemed to be University

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 11

    CHRIST

    Deemed to be University

    Unit 4: Profits and Gains from Business or Profession

    1
    Excellence and Service
    CHRIST
    Deemed to be University

    Charging Provisions u/h Business or Profession


    1. Business or Professional Income
    2. Compensation
    3. Income of a Trade or Professional Association
    4. Export Incentives
    5. Value of benefit/perquisites
    6. Salary, Interest, Bonus, Commission or Remuneration by a partner from a Firm
    7. Any amount received under certain agreement fro not to carry on
    business/profession
    8. Speculation business
    9. Profit from an Illegal Business
    10. Amount received under Keyman Insurance Policy
    11. Transfer of Certain Capital Assets specified u/s. 35 AD
    2
    Excellence and Service
    CHRIST
    Deemed to be University

    Deductions
    Sec 30: Rent, Rates, Taxes, Repairs & Insurance in case of Building

    Sec 31: Repairs & Insurance of Machinery, Plant and Furniture

    Sec 32: Depreciation on Fixed Assets (Tangible Assets: 5%, 10%, 15%,
    20%, 30%, 40%; Intangible Assets: 25%)

    Sec 35: Expenditure incurred in the filed of Scientific Research

    3
    Excellence and Service
    CHRIST
    Deemed to be University
    Sec 35: Expenditure on Scientific Research

    In-house research: (100%)


    ○ Expenditure incurred by a business /company related to research (Research must relate to the
    business if the assessee) is eligible
    ○ Both capital and revenue expenditure, incurred during the relevant previous eligible.
    ○ Capital expenditure does NOT include purchase of land for research purpose.
    ○ Revenue/capital expenditure incurred during 3year immediately preceding the year at
    commencement of business is also eligible.

    Contribution to Approved Agencies/Institutions: (Research need not be related)


    ○ To any Scientific Research Association : 100 % of amount contributed
    ○ To any University/College for social science/statistical research: 100 % of amount contributed
    ○ To any company engaged in scientific research: 100 % of amount contributed
    ○ Towards national lab/ university/ IIT/ approved by prescribed authority: 100% of amount
    contributed.

    4
    Excellence and Service
    CHRIST
    Deemed to be University

    Sec 35AD: (100% deduction) Any capital expenditure incurred by


    assessee for specified businesses such as:-
    ○ Setting up and operating a cold chain facility. (set up after 1/4/2009)
    ○ A ware house facility for storage of agricultural produce. (set up after 1/4/2009)
    ○ Laying up and operating across country natural gas, crude oil or petroleum pipeline network
    for distribution including storage facility of such network. (set up after 1/4/2007)
    ○Building & Operating hotel (2 star & above) on or after 1/4/2010
    ○Building & operating hospital with at least 100 beds set up on or after 1/4/2010
    ○Developing & Building a housing project for slum development on or after 1/4/2010
    ○Production of Fertilizers on or after 1/4/2011
    ○Setting up & operating Inland Container Depot or Container Freight Station on or after
    1/4/2012
    ○Bee-keeping and production of honey and bees wax on or after 1/4/2012
    Note: Any capital expenditure exceeding Rs. 10,000 in cash shall be disallowed.

    5
    Excellence and Service
    CHRIST
    Deemed to be University

    Sec 35D: Amortization of preliminary expenses

    ● Expenditure incurred prior to commencement of business such as


    feasibility report, market survey, legal charges, printing fee,
    registration etc.
    ● It does not include any capital expenditure.
    ● Deduction can be claimed up to 5 % of cost of project or 5% of
    capital employed over a period of five years in equal annual
    installments commencing from the relevant previous year in which
    the new business commenced or extension of existing business is
    completed.

    6
    Excellence and Service
    CHRIST
    Deemed to be University

    Sec 37(1): General deductions


    ● All revenue expenditure related to business is allowed as deduction provided:
    ○ Expenses should not be of capital nature
    ○ It should not be personal expenditure
    ○ It should have been incurred exclusively and wholly for the purpose of
    such business
    ○ Not to be in the nature of fine or penalty paid in offence of any law
     

    ● Sec 37 (2b): any expenditure incurred on advertising in political souvenir


    (manifesto/book) is not allowed as deduction.
     

    7
    Excellence and Service
    CHRIST
    Deemed to be University

    Format: Income from Business

    Particulars Rs Rs
    Net profit (as in P&L a/c)   xx
    Add:    
    Inadmissible expenses which are already debited   xx

    Admissible income which are not credited   xx

    Less:    
    Admissible expenses which are not debited   xx

    Inadmissible income which are already credited   xx

    Taxable Business Income   xxxx

    8
    Excellence and Service
    CHRIST
    Deemed to be University

    Exercise 1: Compute Business Income


    General Expenses 1,07,000 Gross Profit 5,40,000
    Bad Debts 1,000 Interest from Govt Securities 4,000
    Salaries 1,65,000 Rent received from employees 12,000
    Advertisement (in cash) 22,250 Interest from debtors for delayed payment 6,000
    Proprietor’s salary 1,12,500
    Interest on Capital 2,000
    Income Tax 1,000
    Depreciation 2,000
    GST (due) 5,000
    Advance Income Tax paid 1,000
    Donations 500
    Motor car expenses 750
    Municipal taxes of quarters to employees 5,000
    Net Profit 1,39,000
    5,66,000 5,66,000

    9
    Excellence and Service
    CHRIST
    Deemed to be University

    Contd…

    ● A) General expenses include Rs. 4000 paid as compensation to an old employee whose services
    were terminated in the interest of the business and Rs. 2200 by way of help to a poor student.
    ● B) Depreciation calculated according to the rates comes to Rs. 2900.
    ● C) GST was paid on 1-5-2021; date of filing of return is 31-7-2021.
    ● D) 50% of motor-car expenses are for the proprietor’s personal use.
    ● Compute the taxable business income

    10
    Excellence and Service
    CHRIST
    Deemed to be University

    Income from Profession

    Particulars Rs Rs
    A. Professional Receipts
    a)  XX  
    b)  XX

    c)  XX

    B. Professional Expenses    
    a)  XX

    b) XX 

    Taxable Professional Income (A – B)   XXX

    11
    Excellence and Service

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