Income from Business and Profession - Business income | What is profession | exemption of business and profession income

Income from Business and Profession

Hello friends,

Today we have again brought to you an important title related to different types of income, which is income from business and profession, then know about income from business and profession-

Income from Business and Profession

"Income from Business and Profession" is an important head of income, because out of the various heads mentioned in the Income Tax Act, the income of this head receives the highest tax for the government. Before knowing about this type of income, we should know very well about what is business and profession, then we know further-

Meaning of business - In common parlance, business means all kinds of means of earning a living, but its scope is limited for the purpose of income tax. According to Section 2(13) of the Income Tax Act, 1961, "Business includes trade, commerce or construction work or any adventure like trade, commerce or construction work."

Income from Business: - According to the above statement, it is clear that the following four types of income are included in the income from the business -

1. Commerce - There are two parts of commerce - trade and auxiliary activities related to trade. Therefore, before understanding the meaning of commerce, it is necessary to understand the meaning of business. Business refers to the buying and selling of goods to make a profit. But there doesn't need to be profit from the business.

2. Construction work - Construction work refers to the conversion of raw materials into finished goods by the use of labor and power.

3. Adventure - The purpose of including it in the definition of business described in income tax is that if a taxpayer has income from any single transaction, then such income will also be taxed under the same head.

Profession:- Profession refers to such work which requires higher education, intellectual ability, and experience, such as work of doctors, engineers, architects, chartered accountants, etc. In the Income Tax Act, instead of defining the profession, only it has been mentioned that 'profession includes profession'.

Occupation - Business means such work in which experience and skill are more required than education and intellectual ability, such as eater, blacksmith, washerman, goldsmith, etc.

Generally Taxable Income of Business and Profession

1. Income from the sale of goods - Income from purchase and sale of goods is called business income and it is taxable under the head Income from business and profession.

2. Income of commission, discount, agent, etc. - The act of getting the goods sold by the agents is in a way an auxiliary activity of business and the receipt from such income will also be taxable under this head.

3. Income of service providing organizations - Many business organizations provide service by not selling goods, such as hotels, cinemas, hospitals, schools, etc. The fee of service rendered by not selling goods. Business and profession will be taxable under the head income.

4. Occupational Income- Persons engaged in professions like Engineering, Medicine, Chartered Accountants, etc. provide counseling to their clients. The service fee received instead of such consultation will also be taxable under the head Income from business and profession.

5. Cash Assistance- If any assistance has been received from the Government of India or any other institution to any taxpayer for export promotion, then such amount received will be taxable under the head Income from business and profession.

6. Salary, bonus, and interest received by the partners from the firm- If while assessing the partnership institution, the salary, commission, bonus, and interest paid to the partners have been deducted in the form of expenses, then such amount received for the partners from the business will be taxable as income.

7. Profits from speculative business- Income from the speculative business is also taxed under the head Income from business and profession.

8. Income of illegal business - Based on various judgments of the court, it can be said that income from illegal and immoral activities of the taxpayer will also be taxed under the head Income from business and profession.

9. Recovery of bad debts - If a taxpayer has got deduction of any expenditure while computing the income of the business in the previous years and the amount of expenditure has been recovered, then in the previous year in which this amount will be recovered, Income from business and profession in the year shall be taxable in the head.

Tax-Exempt Income from Business and Profession

1. Agricultural Income- Income from agricultural land located in India is tax-free.

2. The number of certain types of awards to the artists - Many types of awards are given by the Central Government and the State Government for performing or performing special work in literary, scientific, artistic work, and sports, which are tax-free.

3. Share received by the partner out of profits of the firm- If any amount received by a partner on sharing of profits of the partnership institution, it shall be treated as tax-free income to the partner as the firm has paid tax on it.

4. Share received by member out of profits of Hindu undivided family- If any amount is paid by a Hindu undivided family as a share of profit of a member, it shall be treated as tax-free income for the member as the family has paid tax on it. have paid.

5. Exemption from income tax in tax holiday years- In many cases, the profit is exempted in the first 10-15 years of the establishment of a newly established business undertaking for export.

So friends, by knowing the income from business and profession in this way, we can calculate the income from our business and profession and the income made on it.

Thank you, friends.