Definition of “Business” and “Profession” under the Income Tax Act, 1961

Table of Contents

1. Business [Section 2(13)]

Business includes:

Any trade, commerce, or manufacturing activity;
Any adventure or concern in the nature of trade(even if short-term or single transaction);
Regular transactionswith the intention to earn profits.

Key Characteristics:

✔ Profit motive (primary objective);

✔ Regularity (repeated transactions);

✔ Organized activity (systematic operations).

Examples:

Profession refers to:

Specialized knowledge-based servicesrequiring specific skills/qualifications;
Vocation(occupation requiring manual/artistic skill).

Key Characteristics:

✔ Expertise/qualification required (e.g., CA, doctor, lawyer);

✔ Personal skill-dependent;

✔ Service-oriented (not goods-based).

Examples:

ASPECT	BUSINESS	PROFESSION
Nature	Trade, commerce, manufacturing	Knowledge/skill-based services
Motive	Profit from goods/services	Earnings through expertise
Qualification	Not mandatory	Often requires certification (e.g., CA)
Examples	Retailers, builders, traders	Doctors, lawyers, architects

Both are taxed under “Profits and Gains of Business or Profession” (PGBP)[Sections 28–44D].
Presumptive Taxation:
- Businesses:Section 44AD (6-8% of turnover).
- Professionals:Section 44ADA (50% of receipts).

Note: The distinction matters for compliance, deductions, and audit thresholds.