defines “business” to include any trade, commerce or manufacture or any adventure
or concern in the nature of trade, commerce or manufacture.
defines “profession” to include vocation.
i.e. income earned not on the basis of professional degree but also on the basis
of inborn talent.
Method of accounting
Sec.145, income under this head shall be computed
in accordance with the method of accounting regularly followed by the assessee.
The two recognized methods are Cash system
and Mercantile system of accounting.
Sec.43(2) defines the term “paid” to mean
actually paid or incurred by the assessee according to the method of accounting
upon the basis of which the Profits and gains of business or profession are computed.
Profits or gains of any
business or profession carried on by the assessee at any time during the previous
Profit on sale of import
entitlements or EXIM Scrip.
Any profit on transfer
of duty entitlement pass book scheme/replenishment certificate.
Any interest salary,
bonus due to or received by a partner of a firm from such firm.
Any compensation or other
payment due to or received by a person in connection with :-
Termination or modification
Where an assessee carries on speculative transactions
which constitute a business , such business shall be considered as a separate and
Speculation transaction mean a transaction
in which a contract for purchase or sale of any commodity including stocks and shares
is periodically or ultimately settled otherwise than by actual delivery or transfer
of the commodity or scrips
Which are not connected
Which are related to
Loss on sale of shares
held as investmen.
Advance money, being
paid for set up a new business which has not commenced.
Anticipated future losses.
Loss due to illegal trade
practices (infringement of law)
Not in nature of trading
loss unless specific provisions made.
Rent of a building (land
revenues, repairs, insurance pre.) excluding capital nature expenses.
Repair & insurance
exp. Of machine, plant, furniture.
The assessee must be
the owner of the asset.
It must be used during
the previous year for business.
Allowed on tangible and
BLOCK OF ASSETS
Assets which are of same group in terms of
rate of depreciation and nature both.
COST OF ASSET
It includes actual cost of acquisition of
asset to bring it to that location and also interest up to the date of first use
less any amt. reimbursed by any person.
WRITTEN DOWN VALUE
For the A.Y.2009-10 WDV of the asset will
be calculated as :-
WDV as on Apr.2008
(+) additional purchase
(-) Net sale consideration
WDV IN CASE OF SLUMP SALE
When one or more asset transferred on lump
The steps as stated above for calculation
of WDV are same except “Net sale consideration”.
In the following
conditions for A.Y.
2009-10, depreciation not allowed as deduction,
if as on 31 march, 2009 :-
Physically no asset
in the block, or
Zero WDV in the block
Both (a) &
CALCULATION OF DEPRECIATION
It is calculated on WDV
as on 31 March, 2009.
In case where the asset
used for less than 180 days then depreciation will be charged at
half of the specified rate
Assessee engaged in mfg.
or production (listed in XI schedule or not)
and Estabilished a new plant or
machinery after 31 March, 2005.
Rate of additional depreciation
On the following assets
additional depreciation not allowed :
Which used in india earlier.
Personal or official
Motor vehicle or road
If the amt. of depreciation
cannot be adjusted in the previous year total income
other than income from salary, such amt. of depreciation is known as unabsorbed
This amt. may be set
off from income of next year other than salary.
Depreciation on Power Generation Plant
SLM method used for calculation
In case such asset sold
in any year, then the balance will charged as terminal depreciation.
WDV – sale price – scrap
In the following cases
terminal depreciation/balancing will be treated as short term capital loss/gain
Asset has not used for
business purpose (partly/wholly)
Asset sold in the year
in which it is acquired.
charge : In case there is profit
on transfer of above asset then up to the WDV of such asset will be taxable and
over the same will STCG.
Following are the depreciation rates applicable
for A.Y. 2009-10 :
Others(not in permanent nature, Acq. On or after
sep.2002 for water supply)
Plant & Machinery/Motor Car
Any P &M
Motor Car (not used on hire)
Ships, high speed vessels
Computer or software
Air/water pollution equip.
If acquired after 31 Mar.1998
(know-how, patent, copyright-trademark, franchises,
license, other rights)
A/c u/s 33AB
Assessee engaged in the
production and growing of tea, rubber, coffee in India.
Amt. deposited in the
SPECIFIED A/C approved
by CG and Board.
The amt. should be deposited
within six months from the end of previous
year or prior to filing of return whichever is earlier.
40% of such income or
Amt. deposited in such
(whichever is less)
The said amt. deposited
must be utilized only for the specified purpose, otherwise taxable.
In case where the business
has been closed then any amt. withdrawn from will be taxable .
In the following cases
the amount withdrawn is not taxable.
Death of assesee
Division of HUF
Liquidation of companies.
If any asset purchased
but sold within the year of sale.
SITE RESTORATION FUND
U/S 33 ABA
Engaged in the working
of petroleum, or natural gas.
Other rules same as per
ON SCIENTIFIC RESEARCH U/S 35
incurred by assessee
It is deductible if connected
with his own business.
Any exp. Incurred
before 03 yrs. from the commencement of business is deductible in
the previous year of business started (salary & material expenses)
These exp. are deductible
whether such asset utilized or not in the same year.
Depreciation u/s 32 has
not allowed on such capital asset.
Cost of land is not the
part of scientific research.
Prior to 03 years all
exp. are deductible.
assesee to the outsiders
will be allowed at 1.25 times of the amt. contributed
has been approved by the CG.
it is not
mandatory that such exp. must be related to his own business.
exp. is irrelevant.
OR RESEARCH EXPENSES
Applicable only for
Engaged in the production
or mfg. of drugs, computer or any other specified product.
Approved and audited.
Deduction allowed at
In case of inadequate
profits or loss then only capital nature expenses will be carried forward as like
EXPENSES ON ACQUISITION OF
PATENT OR COPY RIGHT U/S 35A
Incurred before Apr.1998.
It is in capital nature.
Deduction allowed in
14 equal installments.
TELE COMMUNICATION LICENCE
Any expenses of capital
nature will be deductible in equal installments as per licence period.
If such exp. incurred
before commencement of business then for the balance period deduction will be allowed.
Treatment on sale of
If sale consideration
is less than unabsorbed expenses then balance will be allowed as deduction.
If sale consideration
is resulted in profit then will taxable under this head.
Partly sale will resulted
in partly deduction or in income.
BY WAY OF PAYMENT
TO ASSOCIATION & INSTITUTIONS
FOR CARRYING OUT RURAL
DEVELOPMENT PROGRAMMES U/S 35CCA
Any institution or association
approved before Mar.1983 for the above purpose then any contribution will be
EXPENSES U/S 35D
This deduction is allowed
only to Indian company or non-corporate resident assesee only.
If these expenses incurred
after commencement business then it should be related
to expansion of business or establishment of new unit.
5% of the cost of project
5% of the capital invested.
Whichever is higher is deductible in five equal installments.
5% of the cost of project deductible
in five equal installments.
Deduction will be allowed
from the year in which the project completed or business commenced.
issue expenses (not bonus issue) will always preliminary expenses.
INCURRED ON VOLUNTARY RETIREMENT SCHEME U/S 35DDA
Deduction allowed in
the year of actual payment made.
It is given in five equal
actually paid for stock or other loss for business purpose.
insurance premium paid
for their employees if in any form other than cash.
Commission or Bonus
to employees (actually paid)
Interest on capital
borrowed which used for business is deductible if actually paid.
Amt. borrowed for
payment of direct tax, interest thereon is not deductible.
Contribution to RPF
or annuity fund by employer on actual payment basis.
Contribution to approved
Employees own contribution
will be taxable in the hands of employer if the same will not deposited within specified
Amt. of bad debt
written off as irrecoverable, the business must be continued.
Bad debt connected with scheduled banks.(see
Profits credited in special reserve account
incurred by the company is fully deductible.
where such expenses are of capital nature then deduction allowed
in five equal installments.
It can also c/f as unabsorbed
Advertisement exp. made
in the brochure, books published by the political parties are not allowed as deduction.
Banking cash transaction
Goods transaction tax, Security transaction tax (STT) is business exp. and deductible
LIC, UTI, POST OFFICE,GOVT.
SECURITY AGENT, MF AGENT
Where commission less
than Rs.60000/= DEDUCTION WILL BE
For LIC agent
Both(not given sprtly)33.33%
UTI /SPECIFIED SECURITIES/MF 50%
Where commission is more
than Rs.60000 then no deduction will be allowed.
is not being part of other section.
Not of capital/personal
Incurred during previous
Connected with the
business or profession.
EXPENSES NOT DEDUCTIBLE
Penalties or fine for
Fees for increase in
Payment for acquisition
Transfer of regd. Office.
Payment made to non-resident
without deducting TDS.(see para no.82.1.1)
Fringe benefit tax(FBT), Income Tax. Wealth
tax, are not deductible.
Any amt. paid to relative
or to a person of substantial interest (SI)
Relative – any person
SI – 20% or more voting
power in case companies or profits.
EXPENSES OVER Rs.20000/=
Amt. of invoice over
Payment made other than
account payee cheque or draft.
Applicable only exp.
covered u/s 30 to 37.
Note : the following are not under the ambit
of this section :
When the amt. of invoice
is not over Rs.20000 but total amt. paid over Rs.20000.
Where banking facility
is not available.
The date on which payment
made is holiday/strike.
Provision made towards payment for gratuity
fund will not be deductible and in case where payment made towards approved gratuity
NON-PAYMENT OF DEBTS U/S 43B
This section is applicable
when books are kept on due basis.
Deduction allowed if
the following conditions satisfied :
Payment made in the p.y.
or before the date of filing return.
Evidence attached with
the return of income.
This rule is applicable
in case where deduction are allowed on actual payment basis.
Date of filing return
in case of audit – 30 Sep. otherwise 31 July.
Any amt. recovered during
the previous year which earlier allowed as deduction will be taxable
in the year of receipt.
If any amt. recovered
which earlier allowed as deduction can be set-off with unabsorbed loss of business
subject to the following conditions :
Loss is not connected
with speculation purpose.
Business loss can be
set off only of the year of business terminated.
It can be set off also
when the return of loss has not filed in time.
UPKEEP OF BOOKS U/S
The following persons are need to maintain
the books of account :
the gross receipt is more than Rs.150000 in any previous year out of three pre.
In case new established
profession gross receipt will be more than Rs.150000.
Income over Rs.120000
or the turnover exceeds Rs. ten lakh in any previous year out of
preceding three years or
In case new estabilished
business gross receipts or turnover will be more than the aforesaid limit.
SPECIFIED BOOKS OF
Cash book, ledger.
(in case due basis)
sCarbon copies of bill
issued over Rs.25.
AUDIT OF BOOKS U/S
Where the gross receipts
are more or equal to Rs.40 lac
In case of profession,
where gross receipt more or equal to Rs.10 lac
Where the assessee claim
that his total income is less than specified u/s 44AD. 44AE, 44AF.
Civil construction includes
construction or repairs of dam, bridge, building etc.
Gross receipts does not
exceed Rs.40 lac.
Total income of business
will be deemed at 8% of total receipts.
He may claim more income
than aforesaid above.
No further deduction
will be allowed in case sec. 44AD is applied.
PLYING OF TRUCKS,
ON LEASE OR ON HIRE U/S 44AE
Applicable on those person
does not own more than 10 trucks in the previous year.
In case heavy goods vehicle
then @3500/= p.m. and for others @ Rs.3150/= p.m. per vehicle.
Heavy goods vehicles
mean to weight more than 12000 kgs.
INCOME OF RETAIL
TRADER U/S 44AF
Turnover of the assessee
does not over Rs.40 lac.
Engaged in the business
of retail trade.
Taxable profits @5% of
further deduction will be allowed in case sec. 44AD is applied.