Faculty Management and Commerce
Department Management Studies
Programme BBA (Hons.) Department Management Studies
Semester / Year rd th
3 Year / 6 Semester Batch FT-2022
Course Code BAC304A
Course Title Business Taxation
Course Leader Chandrakala D P
Assignment
Instructions to students:
1. The assignment consists of three questions
2. Maximum marks are 25.
3. The assignment must be submitted to the Course leader.
4. Submission Date : 7th April 2025
5. If the same assignment is received from multiple student’s name, it should be
considered invalid and no marks should be awarded.
Part A 25 Marks
Visit any chartered accountant office and identify the procedure involved in the computation of
income from profession
a. Explain the steps involved in calculating taxable income from a profession, including how
different types of income and deductible expenses are treated.
b. Describe the TDS (Tax Deducted at Source) process for professionals and highlight the
key records and documents required to file an accurate tax return.
c. Discuss the common deductions specific to professional expenses and how these
deductions influence the final taxable income in the computation process.
Reg. Name of the
22MCMS017067 UMRA KHAN
No. Student
Assignment
S Marks
e
c
t
Marking Scheme Max Marks
i CO PO
o Marks Scored
n
s
Visit any Chartered Accountant office and identify the procedure involved in the
computation of Income from profession
Steps involved in calculating taxable income from a
A.1 3 2
P profession 5
a A.2 Describe the TDS (Tax Deducted at Source) process
r 3 2
for professionals and highlight the key records and 10
t
documents required to file an accurate tax return
– A.3 Discuss the common deductions specific to
professional expenses and how these deductions
3 2
A influence the final taxable income in the 10
computation process
Max Marks 25
Total Assignment Marks 25
A.1 Steps involved in calculating taxable income from a profession.
The general procedure followed by a CA in computing income from profession:
1. COLLECTION OF INFORMATION
The CA gathers the following documents and details from the professional:
• Books of account (cash book, journal, ledger)
• Bank statements
• Invoices for professional services
• Expense bills (rent, salary, telephone, internet, etc.)
• Details of assets (like laptops, medical equipment, furniture)
• Details of any loans or advances
2. CLASSIFICATION OF INCOME AND EXPENSES
Income and expenses are categorized under relevant heads:
• Income: Professional receipts/fees, consultation charges, retainers
• Expenses: Rent, salaries to staff, travel, electricity, depreciation on assets, etc.
3. PREPARATION OF PROFIT AND LOSS ACCOUNT
Using the information above, the CA prepares a Profit & Loss account:
• Net profit = Total professional receipts – Allowable expenses
This forms the basis of the taxable income from profession.
4. DEPRECIATION CALCULATION
The CA calculates depreciation on professional assets as per Income Tax Act (not accounting
standards). For example:
• Laptops: 40%
• Furniture: 10%
• Medical equipment: 15% to 40% (depending on type)
5. ADJUSTMENTS AND DISALLOWANCES
The CA makes adjustments such as:
• Disallowing personal expenses
• Disallowing cash payments over Rs. 10,000 (Section 40A(3))
• Interest on capital or loan adjustments
6. COMPUTATION OF TAXABLE INCOME
After all adjustments:
• Taxable income = Net Profit (from P&L) – Deductions (if any)
• Deductions under Chapter VI-A (e.g., 80C, 80D) are also considered.
7. FILING OF INCOME TAX RETURN (ITR)
• ITR-3 or ITR-4 (if under presumptive taxation like Section 44ADA)
• Uploading the return with digital signature or OTP
• Payment of taxes (advance tax or self-assessment tax)
8. RECORD KEEPING AND COMPLIANCE
• CA advises on proper books of accounts (under Section 44AA)
• Suggests use of accounting software (Tally, Zoho, etc.)
• Guides on GST compliance if applicable
A.2 Describe the TDS (Tax Deducted at Source) process for professionals and
highlight the key records and documents required to file an accurate tax return.
TDS (Tax Deducted at Source) process for professionals, along with key records
and documents needed to file an accurate tax return:
1. TDS Process for Professionals
• Any individual, firm, company, or organization that makes payments to a
professional (e.g., doctors, lawyers, consultants) above a threshold limit is
required to deduct TDS before making the payment.
Applicable Section: 194J
TDS on professional fees is governed by Section 194J of the Income Tax Act.
Threshold limit:
If the total amount paid or credited exceeds Rs. 30,000 in a financial year,
TDS must be deducted.
TDS Rates:
• 10% for most professionals (if PAN is provided)
• 20% if PAN is not provided
Process:
• Payment Received: Professional receives payment after TDS deduction.
• TDS Certificate (Form 16A): The payer issues this certificate to the
professional, showing the amount paid and TDS deducted.
• TDS Credit in Form 26AS: The deducted TDS appears in the professional’s
Form 26AS (available on the Income Tax website).
2. Key Records and Documents Required to File Tax Return
A. Income Records
• Invoices or receipts issued to clients
• Bank statements showing credited amounts
• Form 16A (TDS certificates from clients)
• Form 26AS (consolidated TDS credit summary)
B. Expense Records
• Bills for office rent, staff salary, utilities
• Travel, phone, internet, and professional development expenses
• Purchase bills for equipment or software
• Depreciation records for fixed assets
C. Financial Statements
• Profit and Loss Account
• Balance Sheet (if books are maintained under Section 44AA)
• Cash book and ledger (if applicable)
D. Tax Records
• Advance tax payment challans (if applicable)
• Previous year’s ITR copies
• Details of deductions (80C, 80D, etc.)
3. Filing the Return
• ITR Form: Usually ITR-3 (if maintaining books) or ITR-4 (for presumptive
taxation under Section 44ADA).
• Match TDS details from Form 26AS with Form 16A.
• Report total income, expenses, deductions, and TDS properly.
• Claim TDS credit to reduce tax payable.
A.3 Discuss the common deductions specific to professional expenses
and how these deductions influence the final taxable income in the
computation process
1. Common Deductible Professional Expenses
Under Section 30 to 37 of the Income Tax Act, professionals can
claim deductions for expenses incurred wholly and exclusively
for their profession.
A. Rent for Office Premises (Section 30)
• Rent paid for clinic, office, or co-working space
• Must have rent receipts or rent agreement
B. Repairs and Maintenance (Section 30 & 31)
• Repairs to office premises or equipment (not capital in
nature)
• Maintenance of laptops, ACs, medical instruments, etc.
C. Depreciation on Assets (Section 32)
• On computers, furniture, machinery, etc.
• As per prescribed Income Tax depreciation rates
D. Salaries and Wages (Section 37)
• Payments to staff like assistants, clerks, nurses, etc.
• Must be supported by salary register or bank transfers
E. Office Expenses (Section 37)
• Printing & stationery
• Telephone, internet, electricity
• Professional subscriptions (e.g., Bar Council, Medical
Council)
• Consultancy fees paid to others
• Software and accounting tools
F. Travel and Conveyance
• Travel for work (client visits, seminars, etc.)
• Taxi, fuel bills, air/train tickets
G. Interest on Business Loans (Section 36(1)(iii))
• Interest on loans taken for professional purposes (e.g.,
buying equipment, office setup)
H. Insurance for Equipment
• Premiums on insurance of professional tools (like medical
devices)
I. Books, Journals, and Seminars
• Cost of books, online courses, webinars, and seminars for
professional upskilling
2. Impact on Taxable Income
How Deductions Work:
Gross Receipts – Allowable Deductions = Net Profit (Taxable
Income)
For example:
PARTICULARS AMOUNT
Gross professional fee 10,00,000
(-) RENT 1,20,000
(-) SALARIES 2,00,000
(-) TRAVEL EXPENSES 50,000
(-) DEPRECIATION 40,000
(-) INTERNET & PHONE 30,000
NET TAXABLE INCOME 5,60,000
Properly recording and claiming all eligible deductions
significantly reduces taxable income, which directly reduces the
tax liability.
