Income tax by a proprietership firm

Hi Indiatrainer

Your Proprietorship firm incomes and expenses you will have to compute under Profits/gains from Business or Profession head by applying provisions of section 28 - 44DA (whichever applicable). The salary income whatever you get, you will have to show it under Salary head subject to sec.15-17 provisions.

In this method you will have to compute your income and income tax.

Correct me if I am wrong.

@ Harish, 

So if my total profit is X-2 lakhs (2 lakh are my expenses fro staff) from the firm, and Y lakh from my employer, what is the amount on which tax will be applied?   

@ Indiatrainer

As I mentioned earlier, certain provisions need to check while allowing the expenses in order to reach at income under business/profession and same under Salary head.

Let us image you have an A amount of expenses which allowable under act. Then your income under business head will be as follows :

X(Revenue) - A (Allowable expenses) = Income, this income again adjusted with inadmissible expenses which are deducted earlier and income of other head added to revenue earlier. Eventually we arrive at income on which tax will be charged.

For salaries, after calculating Allowances and Perquisites properly, to the extent to which taxable will be shown as income under Salaries along with basic salary, DA, etc....,

Aggregate of both Salary and Business head will be your Gross total income (Provided there is no other income).