INCOME FROM BUSINESS AND PROFESSION

COMPUTING INCOME FROM BUSINESS / PROFESSION

Net Profit from Profit & Loss A/c

Add: Unrelated items debited to Profit & Loss A/c
Expenses related to earlier or future period
Capital Expenditure
Personal expenses
Expenses related to income under other head
Reserve for Bad debts/ Drawings/ Income Tax/
Depreciation as per financial records
Advertisement in souvenir of political party
Revenue Expenses paid in cash (above Rs. 10,000)
Excess payment to relatives
Securities Transaction Tax / Fringe Benefit tax
Less: Unrelated Incomes credited to Profit & Loss A/c
Capital receipt (loans, personal gifts, Inc Tax refund)
Exempt Income (agricultural income, casual income)
Income from other heads (House property, Other sources)
Less: Deductions Allowed
Depreciation specifically allowed as per Income Tax Act
Expenditure on Family planning (only by a company)
NET INCOME FROM BUSINESS / PROFESSION

Q.1] Mr. Ansh More furnishes you the following information for the year ended 31/03/2024:
Particulars Rs. Particulars Rs.
To Salaries 2,40,000 By Gross Profit 8,00,000
To Printing & Stat 20,000 By Winning from lottery 1,50,000
To Travelling & Conveyance 30,000 By NSC Interest accrued 10,000
To Rent 60,000 By Dividend from Indian
To Entertainment Expenses 15,000 Company (TDS – Rs. 2,000) 40,000
To Advertisement Exps 45,000
To Depreciation 32,000
To Advance Income Tax 10,000
To Wealth Tax 8,000
To Embezzlement by Employee 20,000
To Drawings 88,000
To Staff welfare exps 65,000
To Net Profit c/f 3,67,000

10,00,000 10,00,000
Following additional information is given:
a) Salaries include Rs. 40,000 paid to his friend. The same is considered as reasonable as per
Income Tax Rules.
b) Depreciation allowable as per Income Tax Rules is Rs. 42,000.
c) Half of the rent is attributable towards his residential flat.
d) Staff welfare expenses include Rs. 15,000 incurred for medical treatment of his physically
handicapped elder brother (60%), who is also financially dependent on him.
e) He spent Rs. 1,000 for purchase of lottery tickets and invested Rs. 45,000 in Pension Fund of
LIC. Both the amounts are debited to drawings above. (April 2023)
You are required to compute his total taxable income for the Assessment Year 2024-25.

Q.2] Mr. Arpana Dsouza, proprietor of APD and Asso., is differently abled person with inability to hear
(disability 45%), provides the following information for the year ended 31/03/2024:
Particulars Rs. Particulars Rs.
To Salaries 12,50,000 By Gross Profit 15,70,000
To Bad debts 10,000 By UTI dividend 40,000
To Printing exps 11,000 By Gift from a friend 10,000
 To Conveyance 30,000 By Income Tax refund 80,000
To General exps 43,000 (Incl. interest Rs. 12,000)
To GST penalty 9,000
To Fire insurance premium 24,000
To Wealth Tax 36,000
To Depreciation 1,80,000
To Repairs & Maintenance 87,000
To Net Profit c/f 20,000

17,00,000 17,00,000
Following additional information is given:
a) Depreciation allowable as per Income Tax rules Rs. 1,62,000.
b) General expenses include payment of Rs. 32,000 paid in cash.
c) Salaries include to proprietor – Rs. 4,80,000. Out of this salary, he deposited Rs. 1,00,000 in
approved tax saver mutual fund.
d) Printing expenses include Rs. 8,000 for printing of marriage invitation cards of his brother’s son.
e) He paid tuition fees to a school of Rs. 15,000 for his school going daughter, which is included in
general expenses.
f) He paid interest of Rs. 45,000 on education loan taken from BOI for his son, pursuing post-
graduate degree in medicine from University of Mumbai. (April 2023)
You are required to compute his total taxable income for the Assessment Year 2024-25.

Q.3] Mr. Mahesh, proprietor of LMN & Co., provides is the Profit & Loss Account for the year ended
31/03/2024:
Particulars Rs. Particulars Rs.
To Salaries 12,50,000 By Gross Profit 10,00,000
To Rent 87,000 By Interest on PPF 25,000
To Printing exps 22,900 By Salary from Patel & Co. 6,72,000
To General exps 65,000
To Interest paid 69,000
To Advertisement exps 18,000 By Old Bad Debt recovered 18,000
To Conveyance 32,100 By Gift from father 25,000
To Office exps 25,000
To Motor Car exps 10,500
To Life Insurance Premium 18,000
To Depreciation 32,500
To Net Profit c/f 9,65,000
17,40,000 17,40,000
Following additional information is given:
a) Motor car expenses include personal expenses to the extent of 25%.
b) Depreciation as per Income Tax rules, Rs. 28,700.
c) Old bad debts recovered in respect of which deduction is not allowed in the past.
d) Interest paid includes interest of Rs. 22,000 on loan for higher education of his son.
e) Mr. Mahesh is also in service with M/s. Patel & Co. and the details regarding salary received are as
under:
i. Basic Salary – Rs. 20,000 p.m.
ii. Dearness Allowance – Rs. 25,000 p.m.
iii. House Rent Allowance received Rs. 5,000 p.m. (exempt to the extent Rs. 2,000 p.m.)
iv. Bonus – Rs. 48,000
v. Entertainment Allowance – Rs. 2,000 p.m.
vi. Profession Tax paid – Rs. 2,500.
Compute the Net Taxable Income of Mr. Mahesh for the Assessment Year 2024-25. (Nov. 2019)
Q.4] From the following profit and loss account of X for the year ending on 31/03/2024 compute his
business income
Particulars Rs. Particulars Rs.
To Office salaries 15,000 By Gross profits 1,30,000
To General expenses 8,500 By Interest on bank deposits 4,100
To Interest on capital X 3,000 By Interest on deposits 7,600
To Bad debts reserve 5,000 By Refund of income tax for
To Depreciation 15,000 A.Y. 2022-23 1,000
To Advertisement 9,000
To Fire insurance premium 1,200
To Donation 5,000
To Advance income tax 4,000
To GST paid 5,000
To Income tax for 2023-24 3,000
To Net profit 69,000
1,42,700 1,42,700
Following additional information is given
a. Allowable depreciation was Rs. 10,000
b. General expenses include furniture purchased worth Rs. 2,500
c. Office salaries include salaries paid to Mrs. X Rs. 3,000. Mrs. X, B.com writes the accounts of the
business.
d. Advertisement include Rs. 2500 for the advertisement in souvenir of a political party.

Rs. Rs. Rs.

A] INCOME FROM BUSINESS
Net Profit as per Profit & Loss A/c 69,000
Add: Expenses Disallowed
Purchase of Furniture 2,500
Interest on Capital 3,000
Bad Debts reserve 5,000
Depreciation as Financial Accounts 15,000
Donations 5,000
Advance Income Tax 4,000
Income Tax Provision for P.Y. 2023-24 3,000
Advertisement 2,500 40,000
1,09,000
Less: Incomes Disallowed/ Expenses Allowed
Interest on Bank Deposits 4,100
Interest on Deposits 7,600
Refund on Income tax for A.Y. 2022-23 1,000
Depreciation as Income Tax rules 10,000 (22,700)
INCOME FROM BUSINESS 86,300
B] INCOME FROM OTHER SOURCES:
Interest on Bank Deposits 4,100
Interest on Deposits 7,600 11,700
C] GROSS/ NET TAXABLE INCOME 98,000

Q.5] Mrs. Poorva is the proprietor of PQR & Co. following is the Profit & Loss Account for the year ended
31st March, 2024:
Particulars Rs. Particulars Rs.
To Salaries 1,95,000 By Gross Profit b/d 12,25,000
To Conveyance 21,000 By Income Tax refund 25,000
To General Expenses 22,000 By Agricultural Income 35,000
To Interest paid 45,000 By Interest on Savings Bank A/c 11,000
To GST 49,000 By Share of Profit from Part. Firm 45,000
To Municipal Taxes on HP (LOP) 18,000 By Rent from House Property (LOP) 1,50,000
To Advertising expenses 25,000
To Staff welfare 18,000
To Depreciation 24,000
To Stationery Expenses 20,000
To Net Profit c/f 10,54,000
16,14,000 14,91,000
Additional Information:
1) General expenses include Rs. 15,000 paid as contribution to LIC Pension Fund.
2) Interest paid includes Rs. 24,000 interests on Housing Loan paid to Nationalized Bank.
3) GST includes Rs. 7,000 paid towards penalty for delay in filing of returns.
4) Income Tax refund includes interest on income tax refund Rs. 3,700.
Compute the Net Taxable Income of Mrs. Pooja for the Assessment Year 2024-25.

Particulars Rs. Rs. Rs.

(A) INCOME FROM HOUSE PROPERTY (LOP)
GAV (Actual rent received) 1,50,000
Less: Municipal Taxes 18,000
NAV 1,32,000
Less: Deduction U/s 24:
Standard Deduction (30% of NAV) 39,600
Interest on Housing Loan paid 24,000 63,600
Income from House Property 68,400

(B) PROFITS FROM BUSINESS:

Net profit as per P&L 10,54,000
Add: Expenses Disallowed
General Expenses (LIC contribution) 15,000
Interest paid on Housing Loan 24,000
Municipal Taxes 18,000
GST penalty 7,000 64,000
11,18,000
Less: Receipts not taxable
Income Tax refund 25,000
Agricultural Income 35,000
Rent from HP 1,50,000
Interest from Savings Bank A/c 11,000
Share of Profit from Partnership 45,000 2,66,000
Income from Business/Profession 8,52,000

(C) INCOME FROM OTHER SOURCES:

Interest on Income Tax refund 3,700
Interest on Savings Bank A/c 11,000
Income from Other Sources 14,700
(D) GROSS TOTAL INCOME 9,35,100
(E) DEDUCTIONS U/c VIA
U/s 80CCC: LIC Pension Fund 15,000
U/s 80TTA: Interest on Savings A/c 10,000 25,000
NET TAXABLE INCOME 9,10,100