INCOME

FROM PROFIT
AND GAINS
OF BUSINESS
AND
PROFESSION
( S E C T I O N S 2 8 T O 44D)
 What is Business?
According to Sec. 2(13) Business :

Business means the purchase and sale or manufacture of a commodity with a view to make
profit. It includes any trade, commerce or manufacture or any adventure.

To judge a transaction as business transaction, following points should be considered -

1. Nature of commodity
2. Nature of transaction (Whether incidental to a business or not)
3. Intention of the related party
4. Duration of transaction
5. Effort applied in transaction.
Under Section 44AB, Any Business where the total sales turnover or receipts
exceeds Rs. 1 Core in a year should have a tax audit.
 What is Profession?
According to Sec. 2(36) Profession:

Profession means the activities for earning livelihood which require intellectual skill or
manual skill, e.g. the work of a lawyer, doctor, auditor, engineer and so on are in the nature of
profession. Profession includes vocation.

Vocation : Vocation implies natural ability of a person to do some particular work e.g. singing,
dancing, etc. Here, no training or no qualification is required but having natural ability.

Under Section 44AB, As a professional receipts over Rs. 50 Lakhs makes eligible tax
audit
 Types of Profession (U/s 44AA)?
Due date of Filling of Return?

 Specified Profession

 Non – Specified Profession

Due date of Filling of Return:-

1. Without Audit Case on or Before 31st July.
2. With Audit cases on or Before 31th November.

Tax Slabs for Firm and Domestic Company for AY 2024-25 is 30% (excluding
surcharge and cess)
 The following incomes are chargeable
( Taxable ) to income tax under the head
‘PGBP’
;

Under the “Sec. 28 : Basis of Charge”

1. Revenue Profits from Business or Profession : The profits and gains of any business or
profession which was carried on by the assessee (a person who is liable to pay any tax or any sum of amount
payable or have any obligation to pay tax ) at any time during the previous year;
Under the “Sec. 28 : Basis of Charge”
2. Income of trade association, etc : Income derived by a trade, professional or similar association
from specific services performed for its members.

3. Receipts in connection with foreign trade :

a) Profit on sale of import license.

b) Duty Draw back / Duty remission (decrease) scheme / Duty free replenishment (refill) certificate.
c) Cash Assistance (humanitarian aid programs that provide cash, or vouchers
exchangeable for goods and services, directly to recipients )
d) Profit on sale of Duty Entitlement Passbook.
e) Repayment of any customs or excise duty to any person against exports.
Under the “Sec. 28 : Basis of Charge”

4. Value of any benefit or Perquisite from business or profession : The value of any benefit or
perquisite (30% of the total value) whether convertible into money or not, arising from business or the
exercise of profession.

5. Remuneration to partner from the firm : Any interest, salary, bonus, commission or
remuneration due to or received by a partner of a firm from the firm provided that, it has been allowed as
deduction in computing the taxable profits of such firm.
 Under the “Sec. 28 : Basis of Charge”

7. Interest on securities : Interest on securities, if the business of the assessee is to invest in

securities, otherwise interest on securities shall be chargeable to income tax under the head Income from
other sources’

8. Amount received or receivable for certain agreement :

a) Not carrying out any activity in relation to any business or

b) Not sharing any know-how, patent, copyright, trade mark, license, franchise or any other business
or commercial right of similar nature or information or technique.
 Under the “Sec. 28 : Basis of Charge”

9. Recovery against certain capital assets covered u/s 35AD : Any sum received on account of any
capital asset (other than land or goodwill or financial instrument) being demolished, destroyed, discarded or
transferred, if the whole of the expenditure on such capital asset has been allowed as deduction u/s 35AD.

10. Income from speculative transaction.

Sec. 43(5) Speculative Transaction : Speculative transaction means a transaction in

which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or
ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrip.
Income Tax Slabs Under New Tax Regime
for FY 2024-25
Annual Taxable Income New Tax Regime Old Tax Regime

Up to Rs.2.5 lakh Exempt Exempt

Over Rs.2.5 lakh to Rs.3 lakh Exempt 5%

Over Rs.3 lakh to Rs. 5 lakh 5% 5%

Over Rs.5 lakh to Rs.6 lakh 5% 20%

Over Rs.6 lakh to Rs. 9 lakh 10% 20%

Over Rs.9 lakh to Rs.10 lakh 15% 20%

Over Rs.10 lakh to Rs.12 lakh 15% 30%

Over Rs.12 lakh to Rs.15 lakh 20% 30%

Above Rs.15 lakh 30% 30%

 Under the “Sec. 32 : Depreciation”
Conditions of Allowance of depreciation :
There are two essential conditions :
1. Asset should be owned, wholly or partly by the assessee.
2. It should be used for the purpose of assessee’s business or profession.

50% of normal Depreciation :

If any asset is acquired and put to use not to excess of 180 days during same previous year then assessee
can get the benefit of depreciation only 50% of normal depreciation.
 Under, Sec. 35D : Amortization (paying off)
of Preliminary Expenses

Preliminary expenses includes –

1. Preparation of feasibility report,
2. Preparation of project report
3. Conducting market survey.
4. Legal charges for drafting any agreement.
5. Printing charges for the Memorandum and Articles of Association.
Preliminary Expenses ( Max Limit ):-
1. Indian Company:- 5% of 'Cost of Project’ or 5% of the 'Capital employed’
2. Other than Indian Company:- 5% of 'Cost of Project’
 Under, “Sec. 36 : Other deduction”

1. Insurance premium paid for stock which is used for purpose of business / profession.
2. Insurance premium for cattle, Paid by federal milk co-operative society.
3. Insurance premium paid (any mode other than cash) for the health of employees.
4. Bonus or commission to employee. (On actual payment basis)

5. Interest paid on borrowed capital for purpose of business / profession (On actual payment basis).
No deduction of ‘interest paid’ for acquisition of asset from the date of borrowing till the date of ‘put to use’.
(It would be added to cost of asset).
6. Discount on Zero Coupon Bond allowed as deduction on pro-rata basis.
7. Bad debts – The debt should be incidental to the business.
 Under, “Sec. 36 : Other deduction”

1. Employees contribution to provident fund or superannuation fund etc. [Subject to Sec. 43B].
2. Approved gratuity fund. [Subject to Sec. 43B].

3. Expenditure on family planning (Only when assessee is company) : Capital expenditure = 5 equal
installments; Revenue expenditure – in the same previous year.

4. Entertainment expenses, advertisement expenses (Except section 37(2B) i.e. advertisement in political
party).
5. Security Transaction Tax (STT).
 General Deductions U/s 37(1)

The expenditure should not be of the nature described under section 30 to 36

It should not be in the nature of the Capital expenditure.
It should not be personal expenditure of the assesse.
It should have been incurred in the Previous year.
It should be in respect of the business carried on by the assesse.
It should have been expended wholly and exclusively for the purpose of such business.
30 Revenue expenses incurred on Building to be use/used in business by Assessee (owner/tenant)

31 Revenue expenses incurred on Plant and machinery to be use/used in business by Assessee (owner/tenant)

32 Depreciation

32(1)(iia) Additional Depreciation

35 Donation to approved Research Institution

35(2AB) In-House Research Expenditure

35AD Specified Business/VIP Business

35CCA Donation to national fund

35CCC Expenses on Agricultural Extension Project

35CCD Expenses on Training Program under Notified Skill Development Program

35D Preliminary expense

35DD Expenses incurred on amalgamation and demerger

35DDA VRS Compensation paid to Employee

Rates of depreciation prescribed under IT
Act 2024
S No. Asset Class Asset Type Rate of Depreciation
1. Building Residential buildings except hotels and boarding houses 5%

2. Building Hotels and boarding houses 10%

3. Building Purely temporary erections such as wooden structures 40%

4. Furniture Furniture – Any furniture / fittings including electrical 10%

fittings and air conditioners

5. Plant & Machinery Motor car, motor cycle, bike, scooter other than those used 15%
in a business of running them on hire, Mobile phone

5. Plant & Machinery Motor car, motor cycle, bike, scooter other than those used 30%
in a business of running them on hire, acquired on or after
the 23rd day of August, 2019 but before the 1st day of
April, 2020 and is put to use before the 1st day of April,
2020.

6. Plant & Machinery Motor buses/taxies/lorries used in a business of running 30%

them on hire
6. Plant & Machinery Motor buses/taxies/lorries used in a business of running 45%
them on hire, acquired on or after the 23rd day of August,
2019 but before the 1st day of April, 2020 and is put to use
before the 1st day of April, 2020.

7. Plant & Machinery Computers, Laptops, computer software, Printer, Scanner, 40%
UPS and other peripheral devices

8. Plant & Machinery Books owned by assessee, carrying on profession being 40%
annual publications
9. Plant & Machinery Books owned by assessee, carrying on profession not being 40%
annual publications
10. Plant & Machinery Books owned by assessee, carrying on business in running 40%
lending libraries
 Under, “Sec. 40(a) : Expenses not allowed
in any circumstances”

1. Expenditure on advertisement in any souvenir, etc. published by a political party.

2. Payments outside India, in India to a non resident or a foreign company on which TDS is not deducted
and has not paid on or before the due date specified.

3. Payment to residents – on which TDS has not been deducted or before the due date of filing the return of
income – 30% of such sum shall not allowed as deduction.
4. Wealth tax : Wealth tax chargeable under the Wealth Tax Act shall not be allowed as deduction.

5. Tax on Profits and Gains : Any sum paid on account of any tax levied on the profits and gains of
any business or profession shall not be allowed as a deduction.
 Under, “Sec. 40A : Expenses not
deductible in certain circumstances”

1. Excessive payment to relatives.

2. Payment in Cash : Payment made to a person in a day is made exceeding Rs. 10,000 other than account
payee cheque, bank draft or use of electric clearing system, it will be disallowed. Entire amount will be
disallowed.

Exception : Where payment is made for plying, hiring or leasing goods carriages, the limit of
disallowance shall be exceeding Rs. 35,000.
 Under, “Sec. 43B : Deductions allowable
only on actual payment”

1. Any sum payable by the assessee by way of tax, duty, cess or fee.

2. Any sum payable by him as an employer by way of contribution to any provident fund,
superannuation fund or gratuity fund or any other fund for the welfare of employees.
 Certain Allowable Losses

 Robbery or Dacoity.
 Embezzlement (Misappropriation), Theft, etc.

 Loss due to Non-recovery of Advances.

 Penalty paid for infraction of law is not allowed.

 Business & Industrial Deductions

• Profit And Gains from newly established industrial undertaking or hotel business in
backward area U/s 80HH.
• Profit And Gains from newly established Small-Scale Industrial undertaking in
certain areas U/s 80 HHA.
• Profit And Gains from Housing projects in certain cases U/s 80HHBA
• Profit retained for export business U/s 80HHC.
• Profit from export computer software, etc U/s 80HHE
• Deduction in respect of Royalty on Patents U/s 80RRB (Individuals can claim
deductions to the tune of Rs 3 lakh on such income)