Welcome to our Direct Tax Compliance module. In this section, we’ll explore the key provisions related to the computation of profit and gains from business or profession.

3.1 Definition of Business/Profession:

Broad Classification:

Business: Involves trade, commerce, or manufacturing of goods.

Profession: Involves the provision of specialized services.

3.2 Methods of Accounting:

Permissible Methods:

Businesses can choose between cash and accrual basis.

Professionals generally follow the mercantile system.

3.3 Income Computation for Business:

Deductions and Allowances:

Deductions allowed for expenses related to business activities.

Specific allowances for depreciation, rent, and interest.

3.4 Presumptive Taxation:

For Small Businesses:

Presumptive taxation for businesses with turnover up to ₹2 crores.

Assumed profit rates simplify tax calculations.

3.5 Computation for Profession:

Professional Receipts:

Fee charged for professional services is considered income.

Deductions allowed for expenses directly related to the profession.

3.6 Presumptive Taxation for Professionals:

Simplified Approach:

Professionals with gross receipts up to ₹50 lakhs can opt for presumptive taxation.

Assumed profit at 50% of total receipts.

3.7 Special Deductions:

Section 80:

Deductions available for contributions to specific funds and charities.

Encourages philanthropy and social responsibility.

3.8 Tax Planning:

Optimizing Deductions:

Strategic decisions in accounting and financial management.

Utilize permissible deductions for tax efficiency.