We found many people saying that Profits and Gains of Business or Profession head is very difficult head.So in this post they can experience that this head is not much difficult.
All basic things are explained in this post.
Lets start with Section 28 it is charging section which says that profits and gains of business or profession will be taxable under the head Income from business and profession.
Concept number 1
First of all Deduction means subraction , Income tax act 1961 says that your are doing business so you may occur some expenses while doing your business so when you earn your income from business , some expenses would be allowed to deduct from your income and some expenses would be Disallowed (which means you cannot subract certain expenses from your business income)
concept number 2
Now,what are the expenses in which deduction is allowed or disallowed?
Sections 30 to 38 are sections which mention that which expenses are deductible.(Deduction allowed)
Concept number 3
Sections 40(a) , 40(b) , 40A(2) , 40A(3) , 40A(7) , 43 B are some sections which says that your certain expenses would be disallowed.
Concept number 4
Follow this simple rule while finding Profits and Gains of Business or Profession do these additions and subractions to NET PROFIT FROM P&L ACCOUNT
Expenses debited to P&L account but disallowed + Add To net profit
Expenses not debited to P&L account but deduction allowed - Less from net profit
Taxable income from business and profession NOT credited to P&L account + add to net profit
Income which is not taxed under the hear income from business and profession - Less from net profit
Ignore all other incomes and expenses do not add or less them.
These were some of the basic things which you all must know before studying sections of Income from business and profession.
Note-: Deductions of sections 80c to 80u are different from those deductions which are there in head Profits and Gains of Business or Profession.
Giriraaj Vyas
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