INCOME FROM BUSINESS AND PROFESSION

INTRODUCTION:

WHAT DO YOU MEAN BY ‘BUSINESS’?

Business is an activity which is done by any person for the purpose of earning profit. The term ‘Business’ includes following:

• Any trade;
• Commerce;
• Activity relating to manufacturing;
• Any adventure or any occupation which is in the nature of trade or commerce or manufacture.

There are two various types of business which is as follows:

1. Speculative Business Income:
2. Non-Speculative Business Income:

Even if there is not a continuation of business or income it will be still considered as a business. In other words, it is not necessary to have continuity in the business.

WHAT DO YOU MEAN BY ‘PROFESSION’?

A profession is a type of job which need special knowledge, expertise and skill. For e.g. Lawyer, CS, Doctor Etc. In other words, profession is something where a person make use of his/her skills to earn the livelihood.

The term ‘Profession’ is declared as the achievement in specialized knowledge which distinguished it from minimal skill.

INCOME FROM BUSINESS AND PROFESSION:

This income is an income which is shown by the tax payer after taking into consideration the amount showed under the profit and loss account.

This income involves both of the amount even if it is loss which is in negative or profit which is in positive. So basically, the term ‘profit and gains’ means income which is in plus and ‘loss’ means incomes which is in minus income. Under this head all the incomes are taxable whether it is legal or illegal.

The income which is earned by the business man in previous year shall be taxable. Income tax return for business and profession shall be filed on or before 31st July of an assessment year.

BASIS OF CHARGE INCOME:

Income which is charged under the head of ‘Income from business and profession’ is as follows:

• Income which is earned by the assesse as a profit and gains from business or profession in the course of previous year.
• Any compensation or any other payment which is due to or receiving by any person, by whatever name called who manages whole of part of whole of affairs of the company.
• Income which is acquired by a trade or as a professional or from any similar organization from providing any specific service to its member.
• The value of perquisites or benefits which is received by the assesse from business or profession and even if it can be convertible into money or not.
• Any interest, any commission or salary or any kind of remuneration or bonus which is due or it is received by a partner from a firm.
• Any amount which is receivable under a Key man Insurance Policy and that includes he amount which is given as bonus.
• Amount which is receivable from any kind of speculative transactions.
• Any profit which is made by transferring the Duty Entitlement Pass Book Scheme.
• Any profit which is made by transferring the Duty Free Replenishment Certificate.
• Any profit which is made by sale of a license which was granted under the Imports (Control) Order, 1955 or it is made under the Imports and Exports (Control) Act, 1947.
• Any amount which is being received or it is receivable in cash or kind for:

• Not carrying out any action which is concerning any business; or
• Not sharing know-how or patent or license or copy right or any business right.

NON-TAXABLE INCOME:

• Rent of House Property:
• Deemed dividend on shares:
• Winnings from any lotteries or races etc.: