FAQs

Professionals such as lawyers, doctors, engineers, architects, accountants, and film artists are required to maintain books of accounts if their gross receipts exceed ₹1.2 lakh in any of the last three years or are expected to exceed this amount in the current year. Similarly, businesses must maintain books of accounts if their turnover exceeds ₹10 lakh in any of the last three years or is expected to exceed this amount in the current year. Even if your income or turnover is below these thresholds, you may still need to maintain books of accounts if you declare income lower than the presumed income under sections 44AD, 44AE, or 44AF. Failure to maintain the required books of accounts can lead to a penalty of up to ₹25,000.

Documents and books of accounts must be preserved for 6 years following the conclusion of the relevant assessment year. However, there's an important exception that If the assessment for any assessment year has been reopened under Section 147, all the books of account and documents that were kept and maintained at the time of reopening must continue to be preserved until the assessment is completed.

Presumptive taxation refers to a simplified taxation method under the Indian Income Tax Act, where eligible small businesses and professionals can declare income at a fixed percentage of their gross receipts or turnover. This approach reduces the compliance burden by eliminating the need to maintain detailed books of accounts and undergo audits.

Under Section 40A(3), any cash payment exceeding ₹10,000 (₹35,000 for transporters) in a single day to a person is disallowed as a business expense. This means such payments cannot be deducted when calculating taxable business income.

GST paid on business inputs and services can be claimed as Input Tax Credit (ITC) under GST law. However, for income tax purposes, only the GST component not claimed as ITC (i.e., the expense borne by the business) is deductible under PGBP.

If your sole source of income is commission, it is classified under the head "Profits and Gains of Business or Profession" as per the Income Tax Act, 1961. This is because earning commission typically involves carrying out a business activity or profession, such as acting as an agent or intermediary. Commission income is considered business income, you are required to file your income tax return using ITR-3.

Section 37(1) of the Income Tax Act disallows deductions for expenses incurred for purposes that are offenses or prohibited by law. Therefore, penalties for traffic violations, such as fines for speeding or illegal parking, are generally not allowable as business deductions.

No, u/s 10(2) of Income Tax Act, 1961 profit from a patnership firm is exempt in the hands of patner.

Yes, business losses can be carried forward for up to 8 assessment years immediately succeeding the assessment year in which the loss was first computed. However, such losses can only be set off against income from business or profession. To carry forward losses, the return must be filed within the due date specified under Section 139(1).

As per Section 78(2) of the Income Tax Act, if a business is succeeded by another person or entity otherwise than by inheritance, the successor cannot carry forward and set off the losses incurred by the predecessor. This means that in cases of sale, transfer, or reconstitution of a business (excluding inheritance), the new entity is not entitled to benefit from the predecessor's accumulated losses.

These losses can only be set off against profits from speculative business activities. They cannot be adjusted against any other income, such as non-speculative business income, salary, or capital gains. Such losses can be carried forward for up to 4 assessment years immediately succeeding the year in which the loss was incurred.

Audit under Section 44AB is mandatory if a) total sales, turnover, or gross receipts exceed ₹1 crore in a financial year b) for professionals, if gross receipts exceed ₹50 lakh c) for those opting out of the presumptive taxation scheme and whose income exceeds the basic exemption limit. The audit report must be furnished in Form 3CB-3CD.

Yes, if turnover exceeds: ₹1 crore(business); ₹50 lakh (profession); Or if opting out of presumptive scheme after opting in earlier.