INDIAN INCOME TAX 4 -- PROFITS AND GAINS OF BUSINESS OR PROFESSION

Profits and Gains of business or profession

The income referred to in section 28, i.e., the incomes chargeable as "Income from Business or Profession" shall be computed in accordance with the provisions contained in sections 30 to 43D.

However, there are few more sections under Chapter, viz., Sections 44 to 44DA (except sections 44AA, 44AB & 44C), which contain the computation completely within itself. Section 44C is a disallowance provision in the case non-residents.

Section 44AA deals with maintenance of books and section 44AB deals with audit of accounts.

In summary, the sections relating to computation of business income can be grouped as under: -

Specific deductions	Sections 30 to 37 cover expenses which are expressly allowed as deduction while computing business income.
Specific disallowance	Sections 40, 40A and 43B cover inadmissible expenses.
Deemed Incomes	Sections 33AB, 33ABA, 33AC, 35A, 35ABB, 41.
Special provisions	Sections 42, 43C, 43D, 44, 44A, 44B, 44BB, 44BBA, 44BBB, 44DA, 44DB.
Presumptive Income	Sections 44AD, 44AE.

The computation of income under the head "Profits and Gains of Business or Profession" depends on the particulars and information available.

If regular books of accounts are not maintained, then the computation would be as under: -

Income (including deemed income) chargeable as income under this head	xxx
Less: Expenses deductible (net of disallowances) under this head	(xx)

However, if regular books of accounts have been maintained and profit and loss account has been prepared, then the computation would be as under: -

Net Profit as per profit and loss account	xxx
Add : Inadmissible expenses debited to profit and loss account	xx
Add: Deemed incomes not credited to profit and loss account	xx
Less: Deductible expenses not debited to profit and loss account	(xx)
Less: Incomes chargeable under other heads credited to Profit & Loss A/c	(xx)

Disclaimer

In this note, we have attempted to summarise some of the significant aspects to be kept in mind by readers to ensure compliance of Income tax laws and regulations. Readers should ensure to verify specific provisions as applicable to each case before taking any business decisions. It would be pertinent to note that some changes are being made to the Income tax laws and rules and regulations on a continuous basis by way of notifications, clarifications etc issued by the department based on their practical experience in implementing the legislation.

It may be noted that nothing contained in this note should be regarded as our opinion.  Professional advice should be sought for applicability of legal provisions based on specific facts. Though reasonable efforts have been taken to avoid errors or omissions in this note we are not responsible for any liability arising to readers directly or indirectly due to any mis-statements or error contained in this note. It must be noted that the views expressed in the note are based on our understanding of the law and regulations as published by the Government authorities and we may or may not agree or subscribe to such views/ interpretations.