by Under Section 2(20) of the Income-tax Act, 1961, the term “Business” includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The definition is inclusive and therefore covers a wide range of commercial activities. Business may be carried on continuously or occasionally, provided the activity has the character of trade or commercial activity. It may involve buying and selling goods, manufacturing products, providing commercial services, or undertaking business-like ventures. The concept of business is important because profits and gains from business are taxable under Section 28. Thus, business broadly refers to an economic activity undertaken with a commercial objective of earning income or profit.
Characteristics of Business – Section 2(20):
1. Trade, Commerce or Manufacture:
Under Section 2(20) of the Income-tax Act, 2025, business includes trade, commerce or manufacture. Therefore, activities involving buying and selling, commercial dealings, or manufacturing of goods can constitute business for income-tax purposes.
2. Adventure or Concern:
The definition also includes any adventure or concern in the nature of trade, commerce or manufacture. Thus, an isolated commercial venture may also fall within the meaning of business if its nature resembles a trading or commercial activity.
3. Wide and Inclusive Definition:
The expression “includes” makes the definition broad and inclusive. Consequently, the term business is not restricted only to conventional trading or manufacturing activities and can cover other activities having a similar commercial character.
4. Commercial Nature:
Business generally involves a commercial activity carried on for generating income. The nature and circumstances of the activity are relevant in determining whether it constitutes business under the Act.
5. Profit-Earning Activity:
Business normally involves an objective of earning income, profits or gains. Income arising from business is chargeable under the head “Profits and gains of business or profession” under Section 26 of the Income-tax Act, 2025.
6. Continuity Not Always Essential:
Business may ordinarily involve regular or systematic activity, but continuity is not an absolute requirement. An adventure having the nature of trade or commerce may also qualify as business under Section 2(20).
Definition of Profession – Section 2(86)
Under Section 2(86) of the Income-tax Act, 1961, “Profession” includes vocation. A profession generally involves an occupation requiring specialised knowledge, education, training or skill. Examples include legal, medical, engineering, architectural, accounting and consultancy professions. The term is broader than merely a recognised professional qualification because it also covers certain vocations carried on through specialised personal skills or knowledge. Income earned from professional activities is taxable under the head “Profits and Gains of Business or Profession” under Section 28. Certain professionals may also be subject to presumptive taxation provisions under Section 44ADA, subject to prescribed conditions. Thus, profession primarily represents an occupation based on specialised expertise and personal skill.
Characteristics of Profession – Section 2(86)
1. Specialised Knowledge:
A profession generally requires specialised knowledge, education or training in a particular field. Examples include medicine, law, engineering and accountancy.
2. Personal Skill:
Professional income primarily arises from the personal skill, expertise and intellectual ability of the professional.
3. Professional Qualification:
Many professions require recognised qualifications, registration or professional certification before the person can legally practise.
4. Includes Vocation:
Under Section 2(86), profession includes vocation. Therefore, certain occupations based on specialised personal abilities may also be regarded as professions.
5. Independent Activity:
A profession is generally carried on as an independent occupation, rather than as employment under an employer.
6. Professional Income:
Income earned from a profession is included under “Profits and gains of business or profession”. The Act separately recognises professional services for specified tax provisions.
