This document is a study unit from the Institute of Chartered Accountants of India on the topic of Profits and Gains of Business or Profession under Indian Income Tax Law. It is intended for students preparing for the CA examination. The unit begins with learning outcomes covering the meaning of business and profession, speculative transactions, and admissible and inadmissible deductions. It…
This document is a study unit from the Institute of Chartered Accountants of India on the topic of Profits and Gains of Business or Profession under Indian Income Tax Law. It is intended for students preparing for the CA examination, covering the computation of business income under both the default tax regime under section 115BAC and the optional tax regime.
The unit begins with learning outcomes that include comprehending the meaning of business and profession, speculative transactions, and the scope of income chargeable under this head. It also covers admissible and inadmissible deductions, deductions allowable only on actual payment, and deemed income provisions.
A proforma for computation under the default tax regime under section 115BAC is provided, starting from net profit as per the statement of profit and loss. It details adjustments for expenses not allowable, such as depreciation, income tax, payments to residents without TDS, excessive payments to related persons, cash payments exceeding 10,000 rupees, sums payable under section 43B, personal expenses, capital expenditure, and family planning expenses.
A second proforma covers computation under the optional tax regime, starting from the income computed under the default regime. It adjusts for additional depreciation on new plant and machinery and includes a note on deduction under section 35AD for specified businesses.
A table compares the treatment of expenditure for in-house scientific research and contributions to outsiders for scientific research, social science, or statistical research under both regimes. The unit defines business under section 2(13) and profession under section 2(36), explaining that profits from both are taxed alike, and discusses the meaning of profits including cash or kind receipts, capital receipts, and voluntary receipts.