9/7/2018

Income Tax
ON
BUSINESS /
PROFESSION

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Basis of Charge [sec. 28] Contd…

The following income is chargeable to tax under the head
“Profits and gains of business or profession”:
1.Profits and gains of any business or profession;
2.Any compensation or other payments due to or received
by any person specified in section 28(ii);
3.Income derived by a trade, professional or similar
association from specific services performed for its
members;
4.The value of any benefit or
perquisite, whether convertible into
money or not, arising from business
or the exercise of a profession;
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5. any profit on transfer of the Duty Entitlement Pass
Book Scheme.
6. Any profit on the transfer of the duty free
replenishment certificate;
7. Export incentive available to exporters;
8. Any interest, salary, bonus, commission or
remuneration received by a partner from firm; Any
sum received for not carrying out any activity in
relation to any business or not to
share any know-how, patent,
copyright, trademark, etc.
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Contd… Expenses Expressly Allowed

9. Any sum received under a Keyman insurance policy
including bonus;
10. Profits and gains of managing agency; and
11. Income from speculative transaction.
Income from the aforesaid activities is computed in
accordance with the provisions laid down in section 29
to 44D.
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1. Rent, rates, taxes, repairs and insurance for building
[Sec. 30]
2. Repairs and insurance of machinery, plant and
furniture [Sec. 31]
3. Depreciation allowance [Sec. 32]
4. Tea/coffee/rubber development account [Sec. 33AB]
5. Expenditure on acquisition of patent rights and
copyrights [Sec. 35A]
6. Insurance premium [Sec. 36 (1) (i)]
7. Premier for insurance on health of
employees [Sec. 36(1) (ib)]
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Contd… Contd…
8. Bonus or commission to employees [Sec. 36(1)(ii)]
15. Banking cash transaction tax, securities
9. Interest on borrowed capital [Sec. 36(1)(iii)] transaction tax and commodities transaction
10. Employer’s contribution to recognized provident fund tax.
and approved superannuation fund [Sec. 36(1)(iv)]
16. Advertisement expenses [Sec. 37(2B)].
11. Contribution towards approved gratuity fund [Sec.
36(1)(v)] 17. General Deduction [Sec. 37(1)].
12. Employee’s contribution towards staff welfare
schemes
13. Bad debts [Sec. 36(1)(vii)]
14. Family planning expenditure [Sec.
36(1) (ix)]
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EXPENSES NOT DEDUCTIBLE
[Section 37(1)]
1. Damages and penalty paid for transgressing the
terms of agreement with the State.
2. Penalty and damages paid in connection with
infringement of law.
3. Litigation expenditure incurred for curing any defect
in the title of assets or completing that title.
4. Litigation expenses for registration of shares.
5. Fees paid for increase of authorized capital.
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Contd…
9. Payments made for acquisition of good will.
10. Expenditure incurred for acquiring right over or in
land to win minerals.
11. Fees paid to obtain license to investigate and
search minerals.
12. Payment made in consideration of acquiring a
monopoly right to manufacturer a producer (royalty
payable on the basis of goods produced under the
same arrangement is, however,
deductible).
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Contd…
6. Expenditure on raising equity share capital and
preference share capital. However, expenditure on
issue of bonus shares id deductible.
7. Amount paid for acquiring technical know-how which is
to be utilized for the purpose of manufacturing any new
article and such know-how is to become the property
of the assessee at the end of the stipulated period.
8. Amount expended for acquiring a business or a right of
permanent character or an asset
which generates income or for
avoiding compensation in business.
10
Contd…
13. Tax paid by the assessee (who is defaulter by not
deducting tax at source under section 195) on behalf of
non-resident.
14. Compensation paid to contracting party with the object of
avoiding an unnecessary investment in capital assets.
15. Expenditure on shifting of registered office.
16. Insurance premia paid by a firm on life insurance policies
of its partners.
17. Amount paid by liquor contractor to
police staff and other officer to enable
it to make unauthorized purchases
and sales of liquor.
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3

Contd…
18. Amount paid by a company to the Registrar of
Companies as filing fee for enhancement of capital
base of the company.
19. Payment made by assessee company which was
partner in a firm, to outgoing partners of firm on
account of their agreeing to restrain from carrying
on similar business for a period of 15 years.
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Contd…
7. Interest paid by an AOP/ BOI to its members is not
allowed as deduction by virtue of sec. 40(ba)
8. Payment to relatives in excess of fair value – not
deductible [Section 40A(2)]
9. Expenditure in excess of Rs. 20,000 in aggregate in
a day paid otherwise than by account payee
cheque drawn on a bank or account payee bank
draft – Not allowable [Section 40A(3))]
10. Amount not deductible in respect
of certain unpaid liabilities
[Sec.43B]
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Specific Disallowances
1. Interest, Royalty, fees for Technical Services payable
outside India,if on such amount tax is deductible but tax
has not been deducted or deposited with Government.
[Sec. 40(a)(i)]
2. Fringe Benefit Tax [Sec. 40(a)(ic)]
3. Income-Tax [Sec. 40(a)(ii)]
4. Salary Payable Outside India without Tax Deduction
[sec. 40(a)(iii)]
5. Provident Fund Payment without tax
Deduction at Source [Sec. 40(a)(iv)]
6. Certain specified expenses in case
of Partnership Firm
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Books of Accounts to be maintained
[Section 44AA]
The persons carrying on specified professions are required
to maintain specified books of account only if the gross
receipts of their profession have exceeded Rs. 1,50,000
Every other person carrying on business or profession
shall keep and maintain such books of account and other
documents as may enable the Assessing Officer to
compute his total income in accordance with the provisions
of this Act.
a) If his income from business or profession
exceeds Rs. 1,20,000;
b) Total sales/turnover/gross receipts thereof
exceeds Rs.10,00,000
c) the assessee has claimed his income lower
than deemed profits
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Special Provisions for Computing Income on

Tax Audit u/s 44AB Estimated Basis 44AD, 44AE & 44AF
This section applies to following :- Not withstanding anything contained in Sections 28 to 43C,
Person carrying on - Accounts are to be audited for previous year in which - the following provisions will apply.
Sec. 44 AD Sec. 44 AE Sec. 44AF
Business Total sales, turnover or gross receipts exceed Rs. 40,00,000
Business of Civil construction or supply of Plying, hiring or leasing goods Retail trade in any
Assessee labour for it. carriages owned by him. goods or
Profession Gross receipts exceed Rs. 10,00,000 merchandise.

This Section Gross receipts of such Goods carriages owned by Total business
Business covered u/s 44AB, He has claimed his income to be lower than the profits or gains applies if business during the previous assessee at any time during turnover in that
year do not exceed Rs. 40 previous year doesn’t exceed previous year
44AE, 44AF, 4BB and 44BBB so deemed under the respective section.
lacs. 10 lacs doesn’t exceed Rs.
40 lacs.

The assessee is required to get his accounts of such Deemed 8% of Gross receipts (No. of heavy goods 5% of Gross receipts
Profits vehicle x Rs. 3500 x NM) + or such higher sum
previous year audited by a Chartered (No. of other vehicles x Rs. as declared by him
Accountant before 30th September of 3150 x NM)
NM = No. of months
in his Return of
Income.
the assessment year.
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DEPRECIATION [Sec. 32] Contd…

Depreciation allowance [Sec. 32] - Depreciation shall be Block of Assets [Sec. 2(11)] - The term “block of
determined according to the provisions of section 32. assets” means a group of assets falling within a
Conditions for claiming Depreciation - In order to avail class of assets comprising –
depreciation, one should satisfy the following conditions: – tangible assets, being buildings, machinery, plant or
– Asset must be owned by the assessee. furniture;
– It must be used for the purpose of business or profession. – intangible assets, being know-how, patents,
copyrights, trade marks, licenses, franchises or any
– It should be used during the relevant previous year.
other business or commercial rights of similar nature.
– Depreciation is available on tangible as well as intangible
– In respect of which the same
assets.
percentage of depreciation is
prescribed.

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Contd… Contd…
Meaning of “Actual Cost” [Sec. 43(1)] - It means the
Written Down Value [Sec. 43(6)] - Written down value for
actual cost to the assessee as reduced by the proportion
the assessment year 2009-10 will be determined as
under: of the cost thereof, if any, as has been met, directly or
indirectly, by any other person or authority.
Find out the depreciated value of the block on the April 1, 2008.
Step 1 If written down value of the block of asset is reduced to
To this value, add “actual cost” of the asset (falling in the block) acquired zero, though the block is not empty - No depreciation is
Step 2
during the previous year 2008-09. admissible.
From the resultant figure, deduct money received/receivable (together with
If the block of assets is empty or ceases to exist on the
scrap value) in respect of that asset (falling within the block of assets) which last day of the previous year though the
is sold, discarded demolished or destroyed during the previous year 2008-
09.
written down value is not zero - No
Step 3
depreciation is admissible.

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Contd… Minimum Alternate Tax (MAT)

Additional depreciation @ 20% is available on new plant or Applicability of Minimum alternate tax (MAT) sec. 115JB :-
machinery acquired & installed after 31.03.05, if used in • Minimum alternate tax (MAT) sec. 115 JB MAT is
production or manufacturing. applicable in case of companies only.
If asset is used for less than 180 days during the previous year, • If tax liability of a company under normal provision is
in which its purchased, then deprecation & additional
lower than 10% of book profit.
depreciation is restricted to 50% of actual depreciation.
However in subsequent year full depreciation is allowed • In such case, book profit shall be deemed as total
irrespective of use. income & 10% of book profits should be deemed as tax
When a depreciable asset(on which depreciation is claimed on liability.
straight line basis) of a power generating • Up to assessment year 2001-02
unit is disposed in a previous year, then these provisions were covered by
terminal depreciation (loss) is deductible or sec. 115 JA.
balancing charge (gain) is taxable.
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Contd…

• A company is allowed credit of tax paid u/s 115-

JB for the assessment year 2006-07 and
onwards in accordance with the provisions of
section 115-JAA.
• MAT credit can be carried forward for a period of
seven years.

Index
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Deduction for Payment of

Introduction
Deductions to be made [Section 80A] :
The total income of an assessee is to be computed
after making deductions permissible u/s 80C to 80U.
However, the aggregate amount of deductions cannot
exceed the Gross Total Income.
No deduction from certain (following) Incomes :
Long term Capital Gains referred u/s 112, and Short Term
Capital gains referred u/s 111A.
Winnings from lotteries, races, etc. as
referred to in section 115BB.
Incomes referred to in section 115A (1) (a),
115AC, 115ACA, 115AD, 115BBA and
115D.
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Life Insurance Premia, etc., [Section 80C]
Deduction under this section is allowed as follows –
 Deduction is available only in respect of ‘specified
sums’ actually paid or deposited during the previous
year (sum not actually paid and outstanding is not
allowed)
 Specified sums must have been paid/deposited by
an Individual or HUF; and
 The total amount of deduction under this section is
subject to a maximum limit of
Rs.1,00,000.
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Contribution To Certain Pension Funds Contribution to Pension Scheme of Central

[Section 80CCC]
• Amount paid or deposited by individual in the previous
year –
– out of his income chargeable to tax
– to effect or keep in force a contract for any annuity plan of LIC
or any other insurer
– for receiving pension from the fund referred to in section
10(23AAB).
• Quantum of Deduction: Deduction shall be allowed to
the extent of lower of the following –
– Amount so paid or deposited; or
– Rs. 1,00,000
Government or any Other Employer [Sec. 80CCD]
• Deduction in respect of: Deduction is available in
respect of both of the following –
– Sum deposited by assessee in his account in notified pension
scheme; and
– Contribution made by Central Govt. or any other employer to
assesse’s A/c.
• Quantum of Deduction: Deduction shall be allowed to
the extent of aggregate of the following -
Sum paid/deposited by assessee to the credit of his a/c or 10% of salary,
whichever is lower
Sum contributed by the employer in assesse’s A/c or 10% of salary, whichever is
lower

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Deduction In Respect Of
Aggregate Limit u/s 80C, 80CCC & 80CCD Health Insurance Premia [Sec. 80D]
• Deduction is available in respect of the amount paid to
The aggregate amount of effect or to keep in force health insurance under a
deductions under section 80C, scheme –
– made by General Insurance Corporation of India (GIC) and
section 80CCC and section approved by Central Government; or
80CCD shall not, in any case, – made by any other insurer and approved by Insurance Regulatory
and Development Authority.
exceed Rs.1,00,000. • Deduction shall be to the extent of lower of –
– Health insurance premia paid in respect of health of any member
of that HUF; or
– Rs. 15,000 (Rs. 20,000 in case the insured
is a senior citizen).

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Maintenance of A Dependant Being Deduction in respect of

Person With Disability [Section 80DD] Medical Treatment, etc. [Sec. 80DDB]
• Deduction is available in respect of – • Deduction is available in respect of sum actually paid
– expenditure incurred for medical / treatment / nursing / training/ during previous year for medical treatment of prescribed
rehabilitation, or disease or ailment for the following –
– amount paid under scheme LIC / UTI other insurer approved by – In case of individual: himself or his spouse, children, parents,
CBDT for maintenance, of a “dependant”, being a person with brothers and sisters,
disability. – In case of HUF: its member(s),
• Deduction shall be allowed to the extent of – – dependant mainly on such individual or HUF for his support and
– Rs. 50,000 (Rs. 75,000 in case of dependant suffering with severe maintenance.
disability), irrespective of expenditure incurred or sum paid. • Deduction shall be available to the extent of lower of the
following –
– sum actually paid; or
– Rs. 40,000 (Rs. 60,000 in case of a senior
citizen).
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Deduction in respect of Interest on Loan Deduction in respect of Donations

taken for Higher Education [Sec.80E]
• Deduction is allowed under this section to all assesses
• Deduction in available in respect of sum
paid by the assessee in the previous year,
out of his income chargeable to tax, by
way of interest on loan taken –
– for his higher education, or
– for the higher education of his relative.
• 100% of the amount of interest on such
loan Deduction will be admissible.
[Section 80G]
in respect of donations of sum of money in the
following manner –
– 100% deduction will be allowed if donations are given to any
of the 19 specified funds.
– 50% deduction will be allowed if donations made to any of the
5 specified funds.
– 100% deduction shall be allowed subject to the qualifying
amount if donations are made for promoting family planning.
– 50% deduction shall be allowed subject
to the qualifying amount if donations are
made towards any of the 5 specified
purposes.

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Deductions in respect of Rents Paid Deduction in respect of person with

[Sec.80GG]
• Rent actually paid for any furnished or
unfurnished residential accommodation occupied
by the Individual, who is not in receipt of any
House Rent Allowance (HRA).
• The deduction shall be allowed to the extent of
least of the following –
– Rs. 2,000 per month;
– 25% of adjusted total income;
– Rent paid less 10% of adjusted Total Income.
Disability [Section 80U]
• Eligible Assessee: Individual resident in
India, who, at any time during the previous
year, is certified by the medical authority to
be a person with disability
• Deduction: Rs. 50,000 (Rs. 75,000 for
severe disability). Severe disability means
80% or more of disability.

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Other Deductions Contd…

Deduction in respect of certain Donations for Scientific Deduction available to certain Undertakings in certain
Research or Rural Development [Sec.80GGA] Special category States [Sec.80IC]
Deduction in respect of Contribution to Political Parties Profits & Gains from business of Hotels & Convention
[Sec. 80GGB & 80GGC] Centre in Specified Areas [Sec. 80ID]
Profits & Gains from Industrial Undertaking engaged in Special provisions in respect of certain Undertakings in
Infrastructure Development [Sec. 80 IA] North-Eastern States [Sec. 80IE]
Profits & Gains from Undertaking engaged in Deduction available to assessee in the business of
Development of SEZs [Sec. 80IAB] Collecting & Processing Bio-Degradable Waste
Profits & Gains from Industrial [Sec.80JJA]
Undertaking engaged in other than in Deduction in respect of
Infrastructure Development [Sec.80IB] Employment of New Workmen
[Sec. 80JJAA]
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Contd…
Deduction from incomes of Off-shore Banking Units
& International Financial Services Centre [Sec.80LA]
Deduction in respect of income of Co-operative
Society [Sec. 80P]
Deduction in respect of Royalty Income, etc. of
Author of certain Books other than Text Books
[Sec.80QQB]
Deduction in respect of Royalty Income of Patents
[Sec. 80 RRB]

Index
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Liability to pay Advance Tax Due Dates

Every person is liable to pay tax on income in
advance i.e. from completion of the previous Due Date
Amount payble by Corporate Amount payble by Non-
Assessee Corporate Assessee
year (advance tax) if tax payable is Rs. 5,000 or
more. All items of income are liable for payment On or before June 15 of the Up to 15 percent of advance
-
of advance tax. previous year tax payable

However, from Assessment 2010-2011 liability On or before September 15 of Up to 45 percent of advance Up to 30 percent of advance
the previous year tax payable tax payable
to pay advance tax arises, if the tax payable is
Rs. 10,000 or more On or before December 15 of Up to 75 percent of advance Up to 60 percent of advance
the previous year tax payable tax payable

On or before March 15 of the Up to 100 percent of advance Up to 100 percent of advance

previous year tax payable tax payable

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Default in payment of Advance Tax Deferment of Advance Tax

[Sec. 234B] [Sec. 234C]
Under section 234B(1), interest is payable as follows:
When interest is Interest is Rate of interest Period for which interest is payable Interest is payable under section 234C if an
payable payable on
assessee has not paid advance tax or
An assessee who is Interest is Simple interest @ 1 From April 1 of the assessment year underestimated installments of advance tax.
liable to pay payable on percent for every to the date of determination of
advance tax, has accessed tax month or part of income under section 143(1) or
Simple Interest at the rate of 1% per month is
failed to pay such
tax
month where regular assessment is made
to the date of regular assessment
payable for period 3 months for each installment
due.
An assessee who Assessed tax Simple interest @ 1 From April 1 of the assessment year
has paid advance minus advance percent for every to the date of determination of
tax but the amount tax month or part of income under section 143(1) or
of advance tax paid month where regular assessment is made
by him is less than to the date of regular assessment
90 percent of
assessed tax.
Index
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Time for filing Return of Income

[Sec. 139(1)]
Different Situations Due Date for filing Return

1. Where the assessee is a company September 30

2. Where the assessee is person other than a

company –
a)In case where accounts of the assessee are
September 30
required to be audited under any law
b)Where the assessee is “working partner” in
a firm whose accounts are required to be
September 30
audited under any law

c)In any other case

July 31

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Filing of Return in Electronic Form
[Sec. 139D]
Section 139D has been inserted from June 1, 2006. It
provides that the Board may make rules providing for the
class or classes of persons who shall be required to furnish
the return of income in electronic form; the form and the
manner in which the return of income in electronic form may
be furnished; the documents, statements, receipts,
certificates or audited reports which may not be furnished
along with the return of income in electronic form but shall be
produced before the Assessing Officer on demand; the
computer resource or the electronic
record to which the return of income in
electronic form may be transmitted.
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Consequences of Late Submission
If return is submitted after the due date of submission of
return of income, the following consequences will be
applicable. These rules are applicable even if a belated
return is submitted within the time-limit given above –
– The assessee will be liable for penal interest u/s 234A.
– A penalty of Rs. 5,000 may be imposed u/s 271F if belated
return is submitted after the end of assessment year.
– If return of loss is submitted after the due date, a few losses
cannot be carried forward.
– If return is submitted belated, deduction
under section 10A, 10B, 80-IA, 80-IB, 80IC,
80-ID and 80-IE will not be available.
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Filing of Return after Due Date
[Sec. 139(4)]
If the return is not furnished within the time
allowed under section 139(1) or within the time
allowed under section 142(1), the person may
(before the assessment is made), furnish the return
of any previous year at any time before the end of
one year from the end of relevant assessment
year.
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Interest for defaults in furnishing
Return of Income [Section 234A]
If any person fails to furnish his return of income u/s 139 for
any assessment year or furnishes such return after due
date specified in section 139(1), then, he will liable to pay
interest at the rate of 1% per month for the period beginning
from the date immediately following the due date of
furnishing return of income and ending on the Date of
furnishing the return or completion of assessment,
whichever is earlier, calculated on the
amount of self-assessment tax
payable.
Index
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