Profits and Gains from Business or Profession

The income from business and profession is known as profit and gains. While calculating the profit and gains, we deduct various expenses from it. The expenses to be deducted for calculating the gain are defined in the income tax act. Sections 30 to 37 cover expenses, which are expressly allowed as deduction while computing business income, sections 40, 40A and 43B cover expenses which are not deductible. Expenses deductions under section 30 to 37 are of two types. The first is specific deductions which are covered under section 30 to 35 and second is general deductions which are covered under section 36 and 37. Specific deductions are allowed only to some of the businesses while general deductions are allowed to all the businesses. There are certain provisions which allow an assessee to calculate the profit on the presumptive basis, i.e., the profit is presumed on certain basis. These provisions are contained under section 44.

We will be discussing the below topics under this section:

The following expenses given by sections 40, 40A and 43B are expressly disallowed by the Act while computing income chargeable under the head “Profits and gains of business or profession”.

Maintenance of accounts by certain person carrying on profession or business [44AA]

Compulsory audit of accounts [44AB]

 

  • Presumptive taxation

There are special provisions for computing income on estimated basis under sections 44AD, 44AE and 44AF
These provisions are given below—

  1. Profits-gains business on presumptive basis-Section 44AD
  2. Profits-gains business on presumptive basis-Section 44AE

 

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