Business, Profession in income Tax24/07/2020
Business refers to any kind of economic activity done by an assessee for earning profits.
The term business/economic activity includes “any trade, commerce, manufacturing activity or any adventure or concern in the nature of trade, commerce and manufacture”.
There are two types of business, speculative and non-speculative.
- Speculative business income: Income from intraday equity trading is considered a speculative business income. Intraday trading simply means the buying and selling of financial instruments on the same day.
- In other words, the amount (net amount from it) is not fixed and it can change from time to time. For example, share trading business.
- Non-speculative business income: It is the income from trading Futures & Options is taken as a non-speculative business. F&O is also considered as non-speculative as these instruments are used for hedging and also for taking/giving delivery of the underlying contract.
- In other words, the amount (net profit/loss from it) is fixed and does not change for a period of time. For example, any manufacturing/trading or any business.
It is not compulsory to have a series of permanent transactions in a business. In other words, the repetition or continuity of business transactions is not essential.
A profession is a kind of job that requires special expertise, skill and knowledge like that of C.A., Lawyer, Doctor, Engineer, Architect etc. In other words, he/she utilizes either his/her intellectual or manual skills to earn the livelihood.
The term “profession” is about his/her declared accomplishments, in special knowledge distinguished from mere skill.
Income from business and profession
The term ‘Income from business and profession’ means any income shown in profit and loss account after taking into account all the allowed expenditures by an assessee.
The income also includes both positive (profit) and negative incomes (loss). In other words, ‘profit and gains’ represent plus income while ‘loss’ represents minus income. So, both legal and illegal business incomes are taxable in nature.
The income earned by the assessee from the previous year is taxable. An assessee involved in the business/profession should file his/her income on or before 31 July of an assessment year.