PROFITS AND GAINS OF BUSINESS/PROFESSION

PROFITS & GAINS OF BUSINESS/PROFESSION

Section 28

CHARGING SECTION - INCOMES TAXABLE U/H BUSINESS/PROFESSION

As per Section 28, following incomes shall be chargeable u/h PGBP (the list is not exhaustive)

 Profits and gains of any business/profession

·                Export incentives :

Exporters of goods/services are provided additional benefits as rewards for bringing foreign currency within India. Such export incentives are taxable u/h PGBP. Examples:

❑             Profit on sale of import entitlement

❑             Profit on sale of Duty Entitlement Pass Book ('DEPB') scheme

❑             Profit on sale of Duty Free Replenishment Certificate

❑             Cash compensatory support and duty drawback (under duty drawback, indirect taxes paid on the input leg such as customs duty are refunded back to the assessee if he exports the final products out of India)

•                              Value of any benefit or perquisite arising from any business/profession :

If a person carrying any business/profession receives any gift/perquisite from his clients, the value of such gift/perquisite shall be considered to be the income of the person u/h 'profits and gains of business/profession' whether such gift/perquisite is convertible into money or not.

Example : A client is extremely happy with the work of his CA and apart from the agreed upon fees, the client gives a wrist watch worth Rs 50,000 to the CA. The value of such watch shall be included in the income of the CA u/h 'income from business/profession'.

•             Any interest, salary, bonus commission or remuneration, by by a partner of a firm from such firm to the extent allowed u/s 40(b).

•             Non-compete fee received/receivable for not carrying on a business/ profession:

❑             Any payment received by a person for not carrying out any particular business/profession for a particular period or at a particular place is termed as non-compete fee and taxable as PGBP income.

❑             Similarly, any sum received for not sharing any know-how, patent, copyright, trademark, license, etc is also taxable as business income.

•               Sum received under Keyman Insurance Policy:

❑             A person may take a life insurance policy for any of its employees or any other person who are extremely crucial for his business. Such insurance policy is known as Keyman Insurance Policy. The premium paid by the person is allowed to be debited to P&L A/c.

❑             If any sum is received under such a policy by the assessee himself (i.e. the employer), such income is taxable in his hands u/h PGBP. If such sum is received by the employee, such sum is taxable in the hands of the employee u/h salary.

❑             If such sum is received by any other person, such sum is taxable in the hands of the other person u/h other sources.

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