Taxation Exam > Taxation Notes > Fast Track Quick Revision Income Tax > PGBP (Section 28 to 44D), Part - 1
PGBP (Section 28 to 44D), Part - 1
| What is business income ? Section 28 | ||||
| Business | Profession | Salary of partners | Non Competing fees | Keyman insurance Speculative income |
| What is business expenses? Section 30 to 37 subject to section 40 to 43B | ||||
| EE | Asset | Liabilities | Client | Reputation of Company |
| Section 28. Charge | |||
| 1. | The profit of business or profession carried on by the assessee at any time during the relevant PY. | ||
| 2(13) | Business includes trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture | ||
| 2(13) | Profession includes vocation. (Hobby turns into economic activity) | ||
| Assessee | The person who carries on the business | ||
| Commencement of business | The financial year in which trial run is completed. | ||
| 2. | Export incentives | ||
| a. | Profit on sale of import licence | ||
| b | Subsidy | ||
| c. | Duty Drawback. | ||
| 3. | Professional Gifts | ||
| 4. | Any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm. However share of profit from firm is exempt in the hands of partners u/s 10(2A). | ||
| 5. | Non - competing fees. Not doing any competitive business or profession or not sharing any business or professional secrets. | ||
| 6. | Any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. | ||
| 7. | Income from speculative transaction. | ||
| 43(5) | Speculative transaction means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips | ||
| Section 30. Rent, rates and taxes of premises | Section 31. Insurance, repairs of plant, machinery & furniture (PMF). | ||
| 1. | Rent of the premises paid to others / Firm is allowed as deduction. | 1. | Rent of the PMF paid to others / Firm is allowed as deduction u/s 37. |
| 2. | Insurance of premises is allowed as deduction. | 2. | Insurance of PMF is allowed as deduction. |
| 3. | Municipal tax, land revenue subject to S 43B is allowed as deduction. | 3. | Not applicable |
| 4. | Current repairs is allowed as deduction. On capital repairs depreciation can be claimed. | 4. | Current repairs is allowed as deduction. On capital repairs depreciation can be claimed. |
| Current Repairs | Capital Repairs | ||
| 1. | Replacement of part of asset. | 1. | Replacement of whole of asset / Addition of asset. |
| 2. | Renovation of that premises from where sale is made. E.g. Resturant | 2. | Renovation of administrative premises. E.g. Godown. |
| Section 38(2). Asset partly used for business / Profession | |||
| Above expenditure shall be apportioned to that part of asset which is used for the purpose of business. | |||
| Section 36(1). Amount expressly allowed as deduction | ||
| 36(1)(i) | Insurance premium of stock in trade is allowed as deduction. | |
| 36(1) (ib) | Insurance premium on health of employees is allowed as deduction if | |
| a. | Health Insurance is taken on health of all employees; and | |
| b. | Health insurance premium is not paid in cash. | |
| 36(1) (ii) | Bonus or commission to employees is allowed as deduction. | 43B : Bonus is allowed as deduction if actually paid. |
| 36(1) (iii) | Interest on borrowed capital used for the purpose of business or profession is allowed as deduction. Interest till the asset is put to use is not allowed as deduction. As per S 43B if interest to Banks / FI is actually paid then deduction is allowed. | |
| 36(1) (iii) | Employer’s contribution paid towards recognised provident fund or an approved superannuation fund is allowed as deduction | Restriction on deduction |
| 36(1) (iv) | Employer’s contribution towards pension scheme referred in section 80CCD is allowed as deduction. | S 40A(7) : Contribution towards unapproved gratuity fund is not allowed 36(1) as deduction |
| 36(1) (iva) | Employer’s contribution paid towards an approved gratuity fund is allowed as deduction. | |
| 36(1) (v) | As per S 43B if ER’s contribution to above funds is actually paid in respective funds then deduction is allowed. | S 4 0 A(9 ) : C o nt ri b ut i o n towards any Non-Statutory fund or unapproved fund is not allowed as deduction. Also contribution made towards any other fund not allowed as deduction. |
| 36(1) (vii) | Bad Debts is allowed as deduction if debt was treated as income in the earlier PY. Recovery of bad debt is taxable under the head business if earlier it was allowed as deduction. Such recovery always taxed under the head business even if business is closed down. | ||
| 36(1) (ix) | Applicable to Company who incurs expenditure on promotion of family planning amongst employees | Revenue expenses. | Capital expenses |
| 100% allowed | 1/5 allowed | ||
| 36(1) (xv) | Securities transaction paid allowed as deduction if profit from shares is charged under the head business. | Business | Capital Gain |
| Allowed | Not Allowed | ||
| Section 35. Expenditure on Scientific Research | |||||
| Inhouse research : Research should be related to the business | Contribution to outsiders Research may or may not be related to the business. | ||||
| After COB (100% / 200%) | Before COB (only 100%) (only 3 years) | ||||
| Revenue expenditure | |||||
| a. | Rent of premises | allowed | Not allowed | National Laboratory / IIT’s | 200% |
| b. | Salary to scientist | allowed | allowed except perquisites of scientist | Approved University, Colleges, institution. | 175% |
| c. | Raw material / inputs | allowed | allowed | ||
| d. | Salary of support staff | allowed | Not allowed | Social statistical research | 125% |
| Capital Expenditure | 200% if own research by | ||||
| a. | Cost of building | allowed | allowed | a. | company |
| b. | Cost of plant & machinery | allowed | allowed | b. | Research in all products except tobacco, cold drinks |
| c. | Research is approved and expenses audited | ||||
The document PGBP (Section 28 to 44D), Part - 1 is a part of the Taxation Course Fast Track Quick Revision Income Tax.
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FAQs on PGBP (Section 28 to 44D), Part - 1
| 1. What is the scope of Section 28 to 44D of the Income Tax Act? |  |
Ans. Section 28 to 44D of the Income Tax Act covers various provisions related to taxation. It includes provisions on income from salaries, income from house property, profits and gains of business or profession, capital gains, income from other sources, and deductions allowed under different sections.
| 2. How does the Income Tax Act determine the tax liability of an individual? | |
Ans. The Income Tax Act determines the tax liability of an individual by considering their total income, which includes income from different sources such as salary, house property, business or profession, capital gains, and other sources. The Act also provides for deductions and exemptions that can be claimed to reduce the taxable income and, consequently, the tax liability.
| 3. What are the key provisions under Section 44D of the Income Tax Act? | |
Ans. Section 44D of the Income Tax Act pertains to the computation of presumptive income for certain specified businesses. It allows eligible taxpayers engaged in certain professions such as civil construction, supply of labor for civil construction, and the sale of certain goods to compute their income based on a specified percentage of their total turnover or gross receipts.
| 4. Can an individual claim deductions under Section 28 to 44D of the Income Tax Act? | |
Ans. Yes, an individual can claim deductions under various sections from 28 to 44D of the Income Tax Act. These deductions are allowed for specific expenses incurred for the purpose of earning income or carrying out business or profession. For example, deductions can be claimed for rent paid for business premises, expenses related to salary and wages, interest on loans, and depreciation of assets used for business purposes.
| 5. How can an individual ensure compliance with the provisions of Section 28 to 44D of the Income Tax Act? | |
Ans. To ensure compliance with the provisions of Section 28 to 44D of the Income Tax Act, individuals should maintain proper records and documentation of their income, expenses, and deductions. It is also important to accurately report the income from different sources and claim deductions as per the applicable provisions. Seeking professional advice and timely filing of income tax returns can further help in ensuring compliance with the Act.
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