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Taxation Managment

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Taxation Management ­ FIN 623
VU
MODULE 8
LESSON 8.32
INCOME FROM BUSINESS & ITS COMPUTATION
Business Defined Section 2(9)
"Business includes any trade, commerce, manufacture, profession, vocation but doesn't include
employment"
Following incomes (except exempt income) shall be charged to tax under the head `Income from Business'.
a) Profits & Gains from any business in a tax year.
b) Income derived from any trade, profession, sale of goods or provision of any services.
c) Income from hire or lease of tangible movable property.
d) FMV of Perquisites derived by a person by virtue of business relationships.
e) Management Fee derived by a management company.
Income from Business also includes:
 Any profit on debt derived by a person. (it is only applicable to such person, whose is business is to
derive such income. e.g.; a banking company)
 Any amount received by schedule bank from mutual fund, as share of profit.
 Profit earned on debts in course business shall be chargeable to `income from business'.
 Income on leasing by lessor, being banks, leasing companies etc.
Income derived from any trade, profession, sale of goods or provision of any services.
 Income from hire or lease of tangible movable property
 FMV of Perquisites derived by a person by virtue of business relationships.
 Management Fee derived by a management company
Exemptions on Business income Under Part 1 of second schedule
Clause
Exempt Income
(91)
Income of a Text-Book Board.
(92)
University or Educational Institution established not for profit purpose.
(93)
Recognized Computer Training Institution.
(93A)
Recognized Vocational Institute.
(98)
Income of Recognized Sports Board.
(100)
Income of Modaraba Companies.
Speculation Business shall be charged under the head income from business (Separate Treatment)
Treatment of Speculation Business (Sec 19):
 To be treated as distinct and separate from other business carried on by the person.
 Expenditures/deductions incurred on account of speculation business shall be apportioned in light
of section 67.
 Profit and gains arising out of speculation business shall be included in the person's income
chargeable under the head "Income from Business".
Speculation Business Sec.19:
 Speculation means any business in which a contract for the purchase and sale of any commodity
(including [stocks] and shares) is periodically or ultimately settled otherwise than by the actual
delivery or transfer of the commodity, but does not include a business in which:
A contract in respect of raw materials merchandise is entered into by a person in the course of
a manufacturing or mercantile business to guard against loss through future price fluctuations
for the purpose of fulfilling the person's other contracts for the actual delivery of the goods to
be manufactured or merchandise to be sold;
A contract in respect of stocks and shares is entered into by a dealer or investor therein to
guard against loss in the person's holding of stocks and shares through price fluctuations; or
A contract is entered into by a member of a forward market or stock exchange in the course of
any transaction in the nature of jobbing [arbitrage] to guard against any loss which may arise in
the ordinary course of the person's business as such members.
59
Table of Contents:
  1. AN OVERVIEW OF TAXATION
  2. What is Fiscal Policy, Canons of Taxation
  3. Type of Taxes, Taxation Management
  4. BASIC FEATURES OF INCOME TAX
  5. STATUTORY DEFINITIONS
  6. IMPORTANT DEFINITIONS
  7. DETERMINATION OF LEGAL STATUS OF A PERSON
  8. HEADS OF INCOME
  9. Rules to Prevent Double Derivation of Income and Double Deductions
  10. Agricultural Income
  11. Computation of Income, partly Agricultural,
  12. Foreign Government Officials
  13. Exemptions and Tax Concessions
  14. RESIDENTIAL STATUS & TAXATION 1
  15. RESIDENTIAL STATUS & TAXATION 2
  16. Important Points Regarding Income
  17. Geographical Source of Income
  18. Taxation of Foreign-Source Income of Residents
  19. Exercises on Determination of Income 1
  20. Exercises on Determination of Income 2
  21. SALARY AND ITS COMPUTATION
  22. Definition of Salary
  23. Significant points regarding Salary
  24. Tax credits on Charitable Donations
  25. Investment in Shares
  26. SALARY AND ITS COMPUTATION EXERCISES 1
  27. SALARY AND ITS COMPUTATION EXERCISES 2
  28. SALARY AND ITS COMPUTATION EXERCISES 3
  29. Tax treatment of Gratuity
  30. Gratuity Exercise
  31. PROVIDENT FUND
  32. Exemptions on Business income, Treatment of Speculation Business
  33. Deductions Allowed & Not Allowed
  34. Deductions: Special Provisions, Depreciation
  35. Methods of Accounting
  36. Taxation of Resident Company
  37. Taxation of Companies: Exercises
  38. Computation of Capital Gain
  39. Disposals Not Chargeable To Tax
  40. TAX RETURNS & ASSESSMENT OF INCOME UNIVERSAL SELF ASSESSMENT SCHEME
  41. Normal Assessment, USAS, Provisional Assessment, Best Judgment Assessment
  42. ADVANCE TAX COLLECTION & RECOVERY OF TAX PENALTIES & PROSECUTION
  43. What is Value Added Tax (VAT)?
  44. SALES TAX
  45. SALES TAX RETURNS