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Profession and Business Income in India

Profession and Business Income in India

What is the meaning of Business & Profession as per Income Tax Act ?

  • ‘Business’ may be defined as any trade, commerce or manufacturing activity. ‘Profession’ may be defined as a vocation, or a job requiring some thought, skill and special knowledge like that of C.A., Lawyer, Doctor, Engineer, Architect etc.

What expenses can be claimed as deductible expense

  • Rent, Rates, Taxes, Repairs and Insurance of Premises/Buildings.
  • Repairs and Insurance of Plant and Machinery, Furniture.

Depreciation on Building, Machinery, Plant & Furniture owned by the Assessee.

  • Insurance Prem. Paid for Stock&/or Stores.
  • Insurance Premium paid towards Health Insurance Scheme of Employees.
  • Interest paid on borrowed Capital for Business/Profession.

PF & Superannuation Fund contribution, approved Gratuity contribution, only if paid before due dates and not on accrual basis.

  • Bad Debts written-off as irrecoverable.
  • Bonus & Commission paid to Employees.
  • The following expenditures are allowed, if incurred, for furtherance of business without any limit:

Expenditure on

(a) Entertainment
(b) Compliments
(c) Travelling
(d) Advertisement
(e) Maintenance of Guest House

  • Note: Any payment above 20,000 should be made only by Account Payee Cheque/DD. Otherwise, 20% of such expenditure will be disallowed subject to exceptions.
  • Limit for making payments for purchases/expenditure, otherwise than by an Account payee cheque/draft, raised to Rs.35,000 in case of payments for plying, hiring or leasing goods carriages.