Business and Profession

Section 40A of the Income Tax Act, 1961 specifies certain expenses or payments that cannot be deducted while computing taxable income under the head “Profits and Gains of Business or Profession” (PGBP). These provisions aim to prevent tax evasion, ensure compliance, and promote transparency in business transactions. Below is a detailed breakdown of the key disallowances under Section 40A, along with conditions, exceptions, […]

Section 43B of the Income Tax Act, 1961 is a crucial provision that disallows certain expenses unless they are actually paid by the assessee during the previous year. This section overrides the accrual system of accounting and ensures that deductions are claimed only when payments are made. Key Features of Section 43B Cash Basis Over Accrual Basis: Even if an expense is recorded

Section 43CA of the Income Tax Act, 1961 addresses the taxation of undervalued transactions involving business assets (non-capital assets) such as inventory, land, or building held as stock-in-trade. 1. Key Features of Section 43CA Objective: Prevents underreporting of sale consideration for non-capital assets(e.g., real estate held as stock-in-trade). Applicability: Sellersengaged in real estate business (buildings/land held as inventory). Buyersmay also face implications under Section 56(2)(x) if undervaluation

Section 43CB of the Income Tax Act, 1961 standardizes the computation of income from construction contracts and service contracts by mandating specific revenue recognition methods. Below is a detailed breakdown of its provisions, applicability, and implications. 1. Key Features of Section 43CB Objective: Ensures uniform tax treatment for long-term contracts by aligning with Income Computation and Disclosure Standards (ICDS). Methods Prescribed: Percentage

“Deemed profits” are amounts that aren’t traditional business income, but are still taxed as business profits under the Income Tax Act—primarily to prevent tax avoidance. These are covered under Sections 41 and 59, and a few other provisions. (A) Recovery of Allowances/Deductions Previously Claimed [Section 41(1)] Section 41(1) of the Income Tax Act, 1961 empowers tax authorities

Section 44AA of the Income Tax Act, 1961, mandates certain taxpayers to maintain books of accounts, while Rule 6F specifies the record-keeping requirements for professionals. 1. Who Must Maintain Books of Accounts? A.  Businesses Mandatory if: Annual turnover/gross receipts exceed ₹10 lakh(for businesses) or ₹2.5 lakh (for professions) in any of the last 3 years. New businesses: If expected turnover exceeds ₹10 lakh

Section 44AB of the Income Tax Act, 1961 mandates a compulsory tax audit for businesses and professionals exceeding specified turnover/gross receipt thresholds. The audit ensures compliance with tax laws and accurate reporting of income, deductions, and taxes. 1. Applicability of Tax Audit A.  For Businesses SCENARIO THRESHOLD EXCEPTIONS General Rule Turnover > ₹1 crore – Reduced Cash Transactions (≤5%) Turnover

Yes, a tax audit under Section 44AB is compulsory even if the accounts are already audited under: Other laws(e.g., Companies Act, 2013, GST, RBI regulations) Other provisions of the Income Tax Act(e.g., Section 44DA for non-residents) However, the compliance process differs based on whether another audit has been conducted. 1. When Accounts Are Audited Under Other Laws (e.g., Companies Act) Form

1. Purpose of Rule 6G Prescribes the forms and mannerfor submitting tax audit reports Mandates the format and contentsof audit reports to be filed Ensures standardized disclosureof financial information to tax authorities 2. Key Forms Prescribed FORM APPLICABILITY DUE DATE Form 3CA For taxpayers already required to audit under other laws (Companies Act, etc.) 30th September Form 3CB

Section 44AD provides a presumptive taxation scheme for small businesses, allowing them to declare income at a fixed rate without maintaining detailed books of accounts. 1. Applicability ✅ Eligible Businesses: Retail traders Wholesalers Manufacturers (turnover ≤ ₹2 crore) Service providers(except professionals covered under Section 44ADA) ❌ Excluded Businesses: Professionals(doctors, lawyers, CAs – covered under Section 44ADA) Transport operators(covered under Section 44AE)