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PROFITS AND GAINS OF BUSINESS OR PROFESSION 1. What is the Meaning of Business? Business simply means any economic activity carried on for earning profits. According to Sec 2(3) business is any trade, commerce, manufacture or any adventure in the nature of trade commerce and manufacture. Any transaction with a motive of selling at profits included under this concept. It is not necessary that there should be a series of transaction in a business and it should be carried on permanently. 2. What is the Meaning of Profession? Profession is an occupation requiring purely intellectual skills or manual skills controlled by the intellectual skill of the operator. e.g. Lawyer, doctor, engineer etc. So profession refers to those activities where the livelihood is earned by the persons through their intellectual or manual skill. 3. What do you mean by block of assets? Block of assets means the group of assets falling within a same class of assets for which same rate of depreciation is prescribed. Depreciation is allowed on block of assets at the prescribed rates on the written down value of such block of asset. 4. How will you calculate depreciation while computing taxable income from business or profession? Depreciation will be allowed only when the assets are owned wholly or partly by the assessee. If an asset is used partly for business purpose and partly for personal purpose, depreciation shall be allowed only for that part which is used in business or profession. In case, an asset put to use for the purpose of business or profession for a period less than 180 days in that previous year, the depreciation of such asset shall be restricted to 50% or half of the amount calculated at the prescribed rate. 5. What is unabsorbed depreciation? If the full amount of depreciation cannot be charged due to absence or inadequacy of profit, the balance amount of depreciation which cannot be so allowed is called unabsorbed depreciation. Unabsorbed depreciation relating to the previous year can be set off against profit of other business and balance, if any can be set off against his income chargeable under any other head for that year. If still some part of such allowance remains unabsorbed, it can be carried forward. No time limit is fixed for the purpose of carrying forward of unabsorbed depreciation. It can beset off against any income. In the matter of set off, the order of priority is , first, current depreciation, second brought forward business losses and last ,unabsorbed depreciation. 6. What are the deductions or expenses allowable from business or professional income? The following general deductions are allowable from business or professional income; 1) Legal expenses 2) Customs duty, excise duty and sales tax paid 3) Sales tax appeal expenses 4) Day to day expenses to carry on the business 5) Gift to employees
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5. What are the Permissible Deductions from Income from other sources? The following are the Permissible Deductions from Income from other sources:
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1. Deductions under Section 80C: Deduction on account of payment / deposit / investment, etc.. In any of the followings:a) Any amount paid towards Premium of Life Insurance Policy of an Insurance Company, where annual premium of the policy does not exceed 20 % of the Sum Assured (Sum Assured is nothing but the amount for which the policy is taken out). If the annual premium exceeds 20% limit, then amount of premium in excess of 20% shall be ignored for the purpose of deduction under this section. For e.g.: For a Life Insurance Policy of Rs. 1,00,000/- if the annual premium is Rs. 23,000/-, then deduction under this section will be available for only Rs. 20,000/- and balance Rs. 3,000/- shall lapse. b) Such premium may be paid by the assessee on the life of Self or Spouse or Children, whether dependent on the assessee or not. There is no limit on the number of children and a child may be minor or major, male or female, married or unmarried. c) Amount deposited in a Pension Plan or an Annuity Plan of an Insurance Company in India. It would be worth noting here that the same Pension Plan or Annuity Plan may be eligible for Deduction under section 80CCC, but an assessee may either claim deduction under section 80CCC or may claim deduction under this section, but not both. No Double Deduction is allowed under the act. d) Amount contributed by an employee to a Statutory Provident Fund. e) Amount contributed by an employee to a Recognized Provident Fund. f) Amount contributed by an employee to an Approved Superannuation Fund. g) Amount contributed by an assessee to a Public Provident Fund for an amount not exceeding Rs. 70,000/- per annum. h) Investments in National Savings Certificates (N.S.C.) i) Accrued Interest on National Savings Certificates (N.S.C.) j) Investments in National Savings Scheme (N.S.S.). k) Unit Linked Insurance Plan (U.L.I.P.) of Unit Trust of India (U.T.I.) or Life Insurance Corporation of India (L.I.C.) or any other Mutual Fund. l) Contribution to 5 Years, 10 Years or 15 Years Cumulative Time Deposit (C.T.D.) Scheme of Post Office. m) 5 Years Term Deposit with any Scheduled Bank,
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Income from house property [Sec 71B] Non speculation Business Loss [Sec72] Speculation Business Loss [Sec73] Long term capital loss [Sec74] Short term capital loss [Sec74] Loss from the activity of owning and maintaining race horse [Sec74A]
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Tax recovery officers; Any income tax officer can be appointed as Tax recovery officer by the Chief Commissioner of Income Tax. Tax recovery officers can be appointed with specific or general orders. He will exercise powers as applicable. Inspectors: The commissioners appoint them. They are subordinate to ITO. They have no fixed jurisdiction or particular power or function. They are to assist the ITO or other income tax authority under which they are attached. Assessing officer: Assessing officer means an income tax officer. Assistant commissioner or deputy commissioner who is vested with powers to assess. AO is the first and foremost officer of the income tax department who comes in contact with the assessee. He is both an administrator and a quasijudicial officer.
TAX RATES [applicable for the AY 2012-2013] 1. For Individual: Net income % of tax Up to Rs. 1,80,000 Nil Rs.1,80,001-5,00,000 10% Rs.5,00,001-8,00,000 20% Rs.8,00,001 and above 30% 2. For Resident women: Net income Up to Rs. 1,90,000 Rs.1,90,001-5,00,000 Rs.5,00,001-8,00,000 Rs.8,00,001 and above
3. For Senior citizens [ Above 60 years of age & below 80 years of age] Net income % of tax Up to Rs. 2,50,000 Nil Rs.2,50,001-5,00,000 10% Rs.5,00,001-8,00,000 20% Rs.8,00,001 and above 30% 4. For Senior citizens [ Above 80 years of age ] Net income Up to Rs. 5,00,000 Rs.5,00,001-8,00,000 Rs.8,00,001 and above
*Education cess @ 3% is to be calculated on the tax amount.
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