Profit and Gain from Business and Profession
We were discussing about head in last few lectures
And I told you in last lecture that one is accounting profit
On which income tax does not apply
We have to do some adjustments from that
And after those adjustments the profit that comes to us
Income tax always looks at that profit
Sometimes it can happen that when you see in practical life
When you see someone's profit and loss account
Which is prepared by the accountants
Which is prepared by the company
Not by the income tax
Sometimes the figure comes like this
Suppose you have given a gross profit
Suppose there are some expenses here
Take the total expenses 500
Now this gross profit
Apart from this they have also told the interest of their
saving bank
Take the interest of FD
Because current account is generally of companies
And you don't get any interest on current account
FD for example is done by a company in a bank
They get interest on that FD
That also they have added in their income
It is an income statement
What is the other name of profit and loss account?
It is an income statement
There they have shown
After that for example
He sold a land
There was a land in the name of the company
He sold that land
And he got some profit from that land
He put that also here
Accountant will say that this is my income
So he added all these things in his income statement
His gross profit was 1000 rupees
And by doing 200 and 500
His gross profit reached to 1700 rupees
Expenses for example were of 500 rupees
So what will be the net profit?
1200 rupees
But what did I tell you in the last lecture?
I told you that when we are talking about
Business and Profession Head
So By rule
By rule
I
When I am talking about this head
So should I talk about only this head's income
Or should I also talk about other head of income?
There will be taxability
But we will see that in other head of income
Right now we are only talking about business
So should I remove these two things from here?
Should I remove these two things?
What is this?
Other source's income
Interest
What is the other one?
This profit I got by selling land
I will discuss this in capital gains
There we will see what is its taxability
Profit earned from business is not there
What is sale? Is this my work?
What is my main business?
Sale of products
Selling or buying land is not my main business
Earning interest is not my main business
This income I got from other sources
So remove that income once
I am not saying that it will not be taxed
It will be taxed
It will be taxed in other head
Remove it once from here
Now see only business income in this head
What income did you get by doing business?
Sales Minus purchases
Minus expenses
Now removing these two incomes 1000 and 500 500 out of 1000
500 will be the answer
What does income tax do?
We are clearly looking at this from here
Income tax doesn't use so much brain
What do they do?
Income tax
It was a symbol
They hold this figure
They hold the figure of 1200
For example, I am an income tax person
I will come to you
And ask you that I want to apply income tax
So your figure is of 1200
Net profit
So I am assuming that this is
That figure
Which you would have taken to your home
This is the profit which you would have taken to your home
By doing business
So you will say by doing business
No sir, these two things are also there
I have not earned this from business
During the course of my activities
I sold my land
I earned interest from somewhere
That is not my business
Okay, it is not your business
Yes, it is not my business
Okay, it is not your business
So your profit of 1200
From this
We will reduce this
This is a figure of 700
We will reduce this figure
Your answer will be 500
This net profit
Income tax will assume
And what will they take from you on this?
Income tax
It is the same thing
You can hold your ear like this or like that
What are we doing here?
By reducing from 1000 to 500
We are coming directly to 500
What are they doing?
They took 1200 directly
And are removing their income from this
What do we have to do?
Sir, we have to do the same method
As the income tax people do
I am talking about the business head
So the rest of the head of income
If they have given me there
In my profit and loss account
If they have given the income of the other head
Then remove it from there
Just talk about the business head of income
In the business head of income
Tax will be imposed on him
Rest of the head of income
We will see there
We will take tax there
But others will take it in their own ways
Every head has a way
In that way
We will take tax there
We will not leave anyone
Whether you earn money by selling land
Whether you earn by selling goods
If you earn by selling goods then business
If you earn by selling land then
Capital gains
We will not leave anyone
These are the points
Friends, I think I have explained a little more
You must be thinking
Sir, I have explained a lot
Now tell me what is there in the syllabus
Come friends
Let's put a reading of the chapter
And the points that will come out during the reading
We will keep covering
This is the format
We are not discussing it now
When the chapter comes in the middle
Then I will discuss it with you
First of all, it has given the meaning
Meaning of business and profession
Meaning of business
What is the meaning of business?
What do you understand from business?
Buying and selling goods
I would have bought goods from somewhere
I would have sold the goods
That is my business
But what is profession?
For profession you need a degree
You need a qualification
For example, lawyer, doctor
Chartered accountant
Sir, how much style do you have?
Sir, this is in blood
What should I do?
It has given the meaning of profits
How should the profits be?
Whether it is in cash or kind
Now see, the fifth point
It is a great point
It says, legality of the income
Like I gave you an example in the first lecture
That I made a profit by selling drugs
So in my business and profession
It will be taxable
Do you know what a kid will say?
What are you talking about?
I made a profit by selling drugs
And you are saying that
I am degrading my country
And I am earning money from there
And I am paying taxes on it
Sir, the thing is
Government doesn't care
Income tax people don't care
You are degrading the country
What are you doing?
They just want
Sir, have you earned money?
Yes, I have
Have you earned from the source of business?
Have you bought drugs from somewhere and sold it?
Yes, I have
So it's okay
You have sold it, it's okay
Come
And pay the income tax on it
They don't care
Whether it is legal or illegal
You have an illegal income
But it is from the business
So where will it be taxable?
In the business head
Government only cares about its revenue
Government says
Friends I have to bring good days
So good days won't come
I need revenue for that
And for revenue
I don't care whether it is legal or illegal
The illegality of a business
Or profession
Does not exempt its profits
From tax
Revenue is not concerned
With the illegality
Did you understand this point?
Now look at this
This is called distinct business
Now we are only talking about
One company
Suppose I am
For example, I have three companies
I get profit from all three
So the profit of all three
How will I calculate?
Will I do it together or separately?
The names of all three are different
The staff of all three are different
The offices of all three are different
The addresses are different
So I will take out the profit of that
I will take out the profit of this
I will take out the profit of the third
But In which head will the income of all three be taxable?
In the business and profession
Come
As I always tell you
When you read any head of income
What will you check first?
Charging section
So section 28
Of PGBP head
We call it PGBP in short
So it is the charging section of PGBP head
Charging section basically
The law gave power to that section
That The income from business and profession
Under this section
You have to impose tax on it
So he asked
Who gave you the right?
So he said
Section 28 has given me the right
That I impose tax on you
In business and profession
This is the work of the charging section
Income from business and profession
I have got a separate composition
Let's go ahead
See For example
If someone is talking about
If it is the work of an export
The goods are sent abroad
Which means the garment or some food items, he sells them
abroad.
So the government gives him some other benefits.
Some cash assistance is provided.
Sometimes it happens that when you export, you get a
license to import.
And suppose you don't have a license to import.
What will you do with that import license?
Will you eat Bhel Puri with that?
The government gave me a license to import.
I don't have a license to import.
Why did I get a license to import? Because I export.
I don't import anything.
So what will I do?
I will go to an importer and say
Brother, is your license going to expire?
He will say yes.
So take this, I have a license to import.
Buy this license from me and in return give me some money.
This whole activity tell me now, this whole activity is a
business activity.
The government gave me a license.
I sold that license to someone and took the money.
This is a business activity.
Is a house property transaction going on here?
Is it from other sources?
Is there a salary in this?
So where will its income go?
In which head?
In the business and professional head.
Now just think about what this activity is.
If this is a business activity, then where will its income
go?
In the business and professional head.
Adjustments will come later.
First understand where the income will go.
Profit on sale of import entitlement.
If you get it from a cash assistance government, then that
too will be included in the income of PGPP.
What does it mean to be included in the income of PGPP?
Where we write gross profit, where we write gross profit,
then under gross profit,
I will put my P&L account.
I will credit my P&L account.
So that income will not be removed.
For example, we removed the income of other sources.
We removed the income of capital gain.
If I put this income in my P&L, then there is no need to
remove it.
My net profit will increase.
But I will still not remove it.
Why not?
Because this is a business income.
What do we remove?
We remove the other head of income.
But this is a business income, so I will not remove it.
You will see these words a lot in real life.
Custom duty, exercise repaid, transfer of duty entitlement,
any benefit or perquisite, whether you can convert it into
money or not, but it is happening because of business, then
that too will become a part of your income.
Ultimately, what you have to see is that it is not a
business.
Partner's income.
This is also a very important concept, which we will
discuss later.
Sir, if a partner gets a profit from a partnership firm, or
gets a commission, which head will it go to?
It will not go to salary, it will go to the business head.
This is very confusing for people.
We are not discussing it now.
There is a separate concept for this.
These are some things.
Fair market value of the inventory on the conversion as
capital asset.
We discussed this in Capital Gains.
Is there any business of 35 AD?
Come here.
Sir, what is this?
Will we be able to do this?
Tell me one thing, were you able to do it before the salary
chapter?
Do it.
When there was a chapter on house property, were you able
to do it?
You did it, right?
And you did it in such a way that you will definitely do it.
People find this chapter very tough.
But I am telling you,
I will explain it in a basic way.
I just need one thing from you.
Your attention.
Listen to me carefully.
Don't focus on reading.
Focus more on listening.
Once you understand, it will go to your mind.
There won't be any problem.
Let's discuss the concept of speculation business.