TAXATION

Types of House
Property

Self Occupied Let Out House Partly Let Out
House Property Property House Property

Computation of Income from House Property

Continue….

Meaning of Municipal Value: For collection of municipal taxes, local
authorities make periodic survey of all buildings in their jurisdiction. Such
value determined by the municipal authorities in respect of a property, is
called as municipal value of the property.

Meaning of Fair Rent: It is the reasonable expected rent which the property
can fetch. It can be determined on the basis of rent fetched by a similar
property in the same or similar locality.

Meaning of Standard Rent: It is the maximum rent which a person can legally
recover from his tenant under the Rent Control Act. Standard rent is
applicable only in case of properties covered under Rent Control Act.

Meaning of Actual Rent: It is the amount actually received by the owner of
the house property.

Calculation of Gross Annual Value (GAV):

Step-1: Calculation of Reasonable Expected Rent (RER)
Reasonable expected rent will be higher of the following:
• Municipal value of the property ; or
• Fair rent of the property
• But does not exceed Standard Rent

Continue…..

Illustration for better understanding
From the following information compute the reasonable expected rent of each property:

Particulars Property A (₹) Property B (₹) Property C (₹)
Municipal Value
Fair Rent 8,48,484 8,48,484 8,48,484
Standard Rent
2,52,252 2,52,252 2,52,252

N.A. 84,252 9,84,000

Continue…..

• Computation of reasonable expected rent

Property A Property B Property C

Reasonable expected rent Reasonable expected rent Reasonable expected rent

will be ₹8,48,484 (being will be ₹84,252 (being higher will be ₹8,48,484 being

higher of municipal value of municipal value and fair higher of municipal value

and fair rent). rent, but restricted to and fair rent, but restricted

standard rent). to standard rent (standard

rent is higher and hence

restriction of standard rent

will not apply in this case)

Continue…..

Step-2: Computation of actual rent
Actual rent means the rent for which the property is let out during the year.
While computing actual rent, rent pertaining to vacancy period is not to be
deducted. However, unrealized rent (*) is to be deducted from actual rent.
(*) Unrealized rent is the rent of the property which the owner of the
property could not recover from the tenant, i.e., rent not paid by the tenant.

Actual Rent = Annual Rent – Unrealized Rent

Continue…..

Illustration for better understanding:
Mr. Raj owns a bungalow. Throughout the year 2021-22 the bungalow is rented to
Mr. Kumar at a monthly rent of ₹84,000. Due to internal dispute, Mr. Kumar did
not pay rent for the month of March, 2022. What will be the amount of actual
rent to be used to compute gross annual value of the property?

Rent for the month of March, 2022 is not received and, hence, unrealized rent will
come to ₹84,000.

While computing gross annual value of the property, unrealized rent of ₹ 84,000
will be deducted from actual rent. Thus, actual rent to be considered while
computing gross annual value will come to ₹9,24,000 (₹84,000 x 12 months =
₹10,08,000 – ₹84,000 unrealized rent). Unrealized rent of ₹84,000 will be
deducted from actual rent.

Continue…..

Step-3: Computation of Gross Annual Value (GAV)
Gross annual value of a property which is let-out throughout the year will be
higher of amount computed at step 1 or step 2 (as discussed earlier).

Continue…..

Illustration for better understanding:

From the information provided by Mr. Raja in respect of 3 properties rented
out by him compute the gross annual value of all the properties.

Particulars Property A (₹) Property B (₹) Property C (₹)
Municipal Value
Fair Rent 8,48,484 8,48,484 8,48,484
Standard Rent
Annual Rent 2,52,252 2,52,252 2,52,252
Unrealized Rent
N.A. 84,252 9,84,000

9,60,000 Nil 9,60,000

1,60,000 Nil 80,000

Continue…..

Step 1: Computation of reasonable expected rent; it will be higher of
municipal value or fair rent (subject to standard rent). Computation will be as
follows:

Particulars Property A (₹) Property B (₹) Property C (₹)
Municipal Value
Fair Rent 8,48,484 8,48,484 8,48,484
Standard Rent
Amount of Step 1 2,52,252 2,52,252 2,52,252

N.A. 84,252 9,84,000

8,48,484 84,252 8,48,484

Continue…..

Step 2: Computation of actual rent after deducting unrealized rent. The
computation will be as follows

Particulars Property A (₹) Property B (₹) Property C (₹)
Amount at Step 2 8,00,000 84,252 8,80,000

(*) Actual rent after deducting unrealized rent will come to ₹8,00,000 ( ₹9,60,000 –
₹1,60,000) in case of property A, ₹84,252 in case of property B and ₹8,80,000 (₹9,60,000 –
₹80,000) in case of property C.

Continue…..

Step 3: Gross annual value will be higher of amount computed at Step 1 or
Step 2. The computation will be as follows:

Particulars Property A (₹) Property B (₹) Property C (₹)

Amount at Step 1 8,48,484 84,252 8,48,484

Amount at Step 2 8,00,000 84,252 8,80,000

Amount at Step 3 8,48,484 84,252 8,80,000
Gross Annual Value
(Being higher of
Above – Loss Due to
vacancy if any*)

Loss Due to Vacancy: Any loss sustained by the assessee due to the house remains
vacant for the particular period.

Computation of Net Annual Value (NAV):

Following calculation is done to compute NAV:

Particulars Amount

Gross Annual Value xxx
Less: Municipal Taxes Paid xxx

Net Annual Value (NAV) xxx

(Note: Municipal taxes will be deducted from Gross Annual Value if those are fully paid
during the previous year. If Municipal taxes are unpaid or paid by tenant, then it will not
be deducted from Gross Annual Value)

Computation of Income From House Property:

Particulars Amount
xxx
Gross Annual Value (GAV) xxx
xxx
Less: Municipal Taxes Paid
xxx
Net Annual Value (NAV) xxx
xxx
Less Deductions u/s 24
i) Standard Deduction i.e. 30% of NAV
ii) Interest on borrowed capital

Income From House Property



Deductions u/s 24:

• Deductions u/s 24(a):

Standard Deduction i.e. 30% of Net Annual Value (NAV)
• Deduction u/s 24(b):

Interest on borrowed capital
 In case of Let out and Partly let out house property maximum deduction

will be ₹2,00,000
 In case of self occupied property minimum deduction will be ₹30,000 and

maximum deduction will be ₹2,00,000 subject to following two conditions:

1) If loan is taken before April 1st, 1999, then maximum deductible amount
will be ₹30,000 otherwise it will be ₹2,00,000

2) If the loan is taken for repairs or renewal of the house, then in each case
maximum deductible amount will be ₹30,000

Computation of Income From House Property for Self
Occupied House Property:

• In case of Self Occupied House Property, when Income from House
Property is determined up to Net Annual Value Everything will be NIL.

• From Net Annual Value (NAV) deductions u/s 24 are deducted.

Problem-1(April 2019 Q.P.):

Vasantrao owned two houses. For the financial year 2021-2022, Particulars regarding to the house properties
are as per below :

Particulars House No.1 House No.2
₹ ₹

Annual Rent 3,38,000 2,35,000
Fair Rent 3,35,000 2,32,000
Municipal Valuation 3,36,000 2,35,000
Municipal taxes paid
4,000 5,000
Land Revenue paid (Paid) (Due)
Ground rent due 2,500 4,000
Interest on loan borrowed for Construction of 3,200 12,000
the house
Nature of occupation - 1,14,000
Let out for Let out for
Date of completion of Construction Residence
May 2010 Business
April 2012

You are required to compute the income from house property for the assessment year 2022-2023.

Solution:

Computation of Income from House Property of Mr. Vasantrao for the A.Y. 2022-2023

Particulars House No.1 House No.2
(Let Out) (Let out)
Gross Annual Value (GAV) [W.N.-1]
Less: Municipal Taxes 3,38,000 2,35,000
Net Annual Value (NAV) - 4,000 N.A.

3,34,000 2,35,000

Less: Deductions u/s 24: - 1,00,200 - 70,500
i) Standard Deduction- 30% of NAV - - 1,14,000
ii) Interest on borrowed capital
2,33,800 50,500
Income from House Property

Income from HP = House 1 + House 2 = 2,33,800 + 50,500 = ₹2,84,300

Working Note-1: House No.1 House No.2
(Let Out) (Let out)
Calculation of Gross Annual Value:
3,36,000 2,35,000
Particulars
3,38,000 2,35,000
Step-1: Computation of Reasonable Expected Rent 3,38,000 2,35,000
MV or FR whichever is higher but does not exceed SR
Step-2: Computation of Actual Rent
Annual Rent Received – Unrealised Rent
Step-3: Gross Annual Value (higher of Step-1 and Step-2)

Problem-2:

Mr. Sudhakar owned two houses. For the financial year 2021-2022, Particulars regarding to the house
properties are as per below :

Particulars House ‘A’ House ‘B’
(Let Out) (Self Occupied)

₹ ₹

Municipal Valuation 3,60,000 4,80,000
Fair Rent 3,70,000 4,70,000
Standard Rent 3,80,000 4,65,000
Annual Rent 3,78,000 4,50,000
Unrealized Rent of P.Y. 2020-21
Period of Vacancy 15,700 N.A.
Municipal Taxes at 10% of M.V. One month N.A.
Interest paid on loan Paid by tenant Not paid upto 31/03/2021
Loan taken for construction on 1,53,000
Construction completed on 1,70,000 15/07/2011
16/11/2007 10/10/2014
10/04/2010

You are required to compute the income from house property for the assessment year 2022-2023.

Solution:

Computation of Income from House Property of Mr. Sudhakar for the A.Y. 2022-2023

Particulars House ‘A’ House ‘B’
(Let Out) (Self Occupied)
Gross Annual Value (GAV) [W.N.-1]
Less: Municipal Taxes 3,38,500 NIL
N.A. (paid by NIL
Net Annual Value (NAV)
tenant) NIL

3,38,500

Less: Deductions u/s 24: - 1,01,550 NIL
i) Standard Deduction- 30% of NAV - 1,70,000 - 1,53,000
ii) Interest on borrowed capital
66,950 (1,53,000)
Income from House Property

Loss from HP = House ‘A’ + House ‘B’ = 66,950 + (1,53,000) = (₹86,050)

Working Note-1: House ‘A’ House ‘B’
(Let Out) (Self Occupied)
Calculation of Gross Annual Value:
3,70,000 NIL
Particulars
3,62,300 NIL
Step-1: Computation of Reasonable Expected Rent 3,38,500 NIL
MV or FR whichever is higher but does not exceed SR
Step-2: Computation of Actual Rent
Annual Rent Received – Unrealised Rent
Step-3: Gross Annual Value
(higher of Step-1 and Step-2 – Loss Due to Vacancy)
(3,70,000 – 31,500)

Loss Due to Vacancy = Annual Rent/12 months
= 3,70,000/12 = 31,500

So, 1 month loss due to vacancy = 31,500 x 1 month = 1 month

Unit-2: HEADS OF INCOME

INCOME FROM BUSINESS
& PROFESSION

Prepared & Presented by,
Prof. Vikrant D. Palatshaha

MKSSS’s Shri Siddhivinayak Mahila Mahavidyalaya, Karvenagar, Pune-52

Meaning:

Sec. 2(13) Business : Business means the purchase and sale or manufacture of a commodity with
a view to make profit. It includes any trade, commerce or manufacture or any adventure (Doing
activity for the first time without knowing the outcome) or concern in the nature of trade,
commerce and manufacture.

continue:

Sec. 2(36) Profession: Profession means the activities for earning livelihood which require
intellectual skill or manual skill, e.g. the work of a lawyer, doctor, auditor, engineer and so on are
in the nature of profession. Profession includes vocation.

Vocation : Vocation implies natural ability of a person to do some particular work e.g. singing,
dancing, etc. Here, no training or no qualification is required but having natural ability.

Sec. 28 : Basis of Charge :

The following incomes are chargeable to income tax under this head:
1. Revenue Profits from Business or Profession
2. Any Compensation due to or received by an agent
3. Income of trade association
4. Receipts in connection with foreign trade
5. Value of any benefit or Perquisite from business or profession
6. Remuneration to partner from the firm
7. Amount received or receivable for certain business agreement
8. Keyman Insurance Policy
9. Interest on securities
10. Recovery against certain capital assets covered u/s 35AD
11. Income from speculative transaction

Computation of Income from Business: Amount
Particulars xxx
xxx
Net Profit as per P & L A/C
xxx
Add: Disallowed Expenses
• Household Expenses, Personal expenses, Capital Expenses, LIC Premium, Donations, Provisions & Reserves xxx
• Excess Salary paid to Relatives
• Provision of GST
• Proprietors Salary, Interest on Capital, Interest on Drawings
• Excess of Depreciation, Outstanding Expenses u/s 43B
• Payment made in cash in excess of ₹20,000
• Income Tax, Wealth Tax, Gift Tax, Advance Tax
• Contribution to Political Party, Contribution to PPF & URPF
• All Capital Losses, GST Penalty, Fringe Benefit Tax
• Undervaluation of Closing Stock or Overvaluation of Opening Stock
• Incomes taxable as business income but not credited to the P & L A/c

Less: Expenses or losses allowed but not debited to P & L A/c

Incomes not taxable as business income but credited to the P & L A/c
• Income from House Property
• Bad Debts Recovered (not allowed as deduction)
• Refund of Income Tax
• Gift, Dividend Received
• Interest on F.D. or Debentures or Bonds
• Winning from lotteries, Profit on sale of Capital Assets, Grant & Subsidies Received
• Income from speculative transactions

Income from Business

Solution:

Scientific Research Expenditure :

It means expenditure incurred on scientific research would include all expenditure incurred for
the prosecution or the provision of facilities for the prosecution of scientific research but does
not include any expenditure incurred in the acquisition of right in or arising out of scientific
research.

Section Expenditure incurred / contribution made Deduction (As a % of
35(1)(i) contribution made)
35(1)(ii)
Revenue Exp. Incurred on scientific research related to the 100%
assessee’s business

Research Association for scientific research 150%

35(1)(iia) Company for scientific research 100%

35(1)(iii) Research Association for research in social science or statistical 100%
35(1)(iv) research 100%

Capital expenditure (Other than expenditure on land)

35(2AB) Expenditure on in-house research (Except land and building) 150%

Computation of Income from Profession: Amount
xxx
Particulars xxx
Professional Receipts xxx
Less: Professional Payments
Income from Profession Problem 4 Solution:
Problem 5 Solution:

Problem-1: ₹

The following is the P&L A/C for the Financial Year ending on 31st March 2022 furnished by Mrs. Surekha:
Particulars ₹ Particulars

To Salary 1,40,000 By Gross Profit 4,57,000
To Advertisement 15,000 By Interest on Fixed Deposit 19,000
To Depreciation 68,000 By Dividend 6,000
To Rent & Taxes 13,000 By Bad Debts Recovered 15,000
To Municipal Tax of Residential House 9,000 By Commission 25,000
To GST 25,000 By Sundry Receipts 3,000
To Legal Charges 12,500
To R.D.D. 5,000
To Banking Cash Transaction Tax 8,000
To Interest on Capital 7,500
To Bad Debts 9,000
To Net Profit
2,13,000

5,25,000 5,25,000

Other Information:
1) Salary includes payment of ₹23,000 to daughter of Mrs. Surekha, out of it ₹3,000 is excessive as compared to other employees of same category.
2) Allowable amount of depreciation as per income tax rule is ₹64,000.
3) GST includes ₹3.000 as penalty and ₹2,000 interest for late payment of GST charged by the GST authority.
4) Bad debts recovered were written off in the year 2017-18 and admitted by the Income-Tax Department.
You are required to compute taxable income of Mrs. Surekha from Business for the A.Y. 2022-2023.

Solution:

Solution:

Computation of Taxable Income from Business of Mrs. Surekha for the A.Y 2022-2023

Particulars ₹ ₹
2,13,000
Net Profit as per P&L A/C
+ 31,500
Add: Disallowed Expenses 3,000 2,44,500
i) Excess Salary paid to relatives (daughter) 4,000
ii) Excess Depreciation (68,000 – 64,000) 3,000 - 25,000
iii) Penalty charged by GST Authority 9,000 2,19,500
iv) Municipal Tax of Residential House 5,000
v) R.D.D. 7,500
vi) Interest on Capital

Less: Incomes not taxable as business income 19,000
i) Interest on Fixed Deposits 6,000
ii) Dividends

Taxable Income from Business

Problem-1:
Computation of Income from
Business:

Problem-2:

The following is the Profit and Loss Account of Shri. Ramarao for the year ended 31-3-2022. ₹
Particulars ₹ Particulars 17,20,000

To Opening Stock 2,30,000 By Sales 40,000
To Purchases 2,80,000 By Closing Stock 54,000
To Wages 2,40,000 By Gift from father
To Rent 2,92,000 By Income Tax Refund 6,000
To Repairs of Motorcar
To Medical Expenses 26,000 18,20,000
To General Expenses 50,000
To Motorcar 2,20,000 Solution:
To Provision for Depreciation on Motor Car 2,60,000
To Advance Income Tax paid 28,000
To Net Profit 22,000
1,72,000

18,20,000

Other Information:
i) Ramarao carries on his business from rented premises. Half of which is used for his residence.
ii) The use of the car was 3/4 for the business and 1/4 for personal purposes.
iii) Medical expenses were incurred for the treatment of Mr.Ramarao.
iv) Wages include ₹25,000 on account of Mr. Ramarao’s driver.
v) As per Income Tax Rules rate of depreciation on Motorcar is 15%.
Find out the income from business for Mr. Ramarao’s tax levy year 2022-23.

Solution:

Computation of Taxable Income from Business of Shri. Ramrao for the A.Y 2022-2023

Particulars ₹ ₹

Net Profit as per P&L A/C 1,72,000

Add: Disallowed Expenses 6,250 + 5,18,750
i) Mr. Ramrao’s Drivers Salary (1/4th for Personal use i.e.25,000/4) 1,46,000 6,90,750
ii) Rent (50% for Residence)
iii) Repairs to Motor Car (1/4th for Personal use i.e. 26,000/4) 6,500 - 89,250
iv) Medical Expenses (Personal Expenses) 50,000 6,01,500
v) Motor Car (Capital Expenditure) 2,60,000
vi) Provision for Depreciation on Motor Car 28,000
vii) Advance Income Tax paid 22,000

Less: Expenses or losses allowed but not debited to P & L A/c 29,250
Depreciation on Motor Car*
54,000
Incomes not taxable as business income 6,000
i) Gift from Father
ii) Income Tax Refund

Taxable Income from Business

*Calculation of Depreciation on Motor Car= 15% of ₹2,60,000 = ₹39,000 out of which 3/4th is allowed i.e. 39,000 x ¾ = ₹29,250

Problem-2:
Computation of Income from Business:

Problem-:3

The following is the P&L A/C for the Financial Year ending on 31st March 2022 furnished by Mr. Rohit:

Particulars ₹ Particulars ₹
4,00,000
To Advertisement 18,000 By Gross Profit
To Fire Insurance 8,000 By Bad Debts Recovered (Not allowed as 16,800
To Salary 60,000
To Office Expenses 1,50,000 deduction earlier) 12,000
To Depreciation 10,000 By Gift from mother
To Income Tax 35,000 By Interest on Bank Deposits 4.88,800
To Bonus 17,000
To GST 25,000 Solution:
To Interest on Bank Loan 9,000
To RDD 11,000
To Net Profit 7,000

1,98,800

4,88,800

Other Information:
1) Advertisement includes ₹1,500 as expenditure incurred on it for selling household furniture.
2) Salary includes ₹9,000 paid to domestic services.
3) Allowable amount of depreciation as per income tax rule is ₹32,000.
4) GST includes ₹2.500 as penalty for late payment of GST charged by the GST authority.
You are required to compute taxable income of Mr. Rohit from Business for the A.Y. 2022-2023.

Solution:

Computation of Taxable Income from Business of Mr.Rohit for the A.Y 2022-2023

Particulars ₹ ₹
1,98,800
Net Profit as per P&L A/C
+ 51,000
Add: Disallowed Expenses 1,500 2,49,800
i) Advertisement (selling of household furniture) 9,000
ii) Salary (paid to domestic services) 3,000 - 88,800
iii) Excess of Depreciation (35,000 – 32,000) 17,000 1,61,000
iv) Income Tax 2,500
v) GST Penalty 11,000
vi) Interest on Bank Loan 7,000
vii) RDD

Less: Incomes not taxable as business income 16,800
i) Bad debts recovered 60,000
ii) Gift from Mother 12,000
iii) Interest on Bank Deposits

Taxable Income from Business

Problem-:
Computation of Income from Business:

Problem-:4

The following is the Receipts & Payments A/C of Medical Practitioner for the year ending 31st March 2022:

Receipts ₹ Payments ₹
1,10,000 2,20,000
To Balance b/d 2,55,000 By Clinic Rent 1,80,000
To Visiting Fees 2,75,000 By Staff Salaries
To Consultation Fees 1,25,000 By Electricity & Water 9,000
To Sales of Medicines By Medical Books 4,000
To Sale of Old Equipment at Book Value 8,000 By Purchase of Medicines 80,000
To Operation Theatre Rent 1,15,000 By Motor Car Expenses 60,000
To Interest & Dividend By Audit Fees 20,000
20,000 By Staff Welfare Expenses 8,000
By Entertainment Expenses 6,000
9,08,000 By Surgical Equipments 1,30,000
By Balance c/d 1,91,000
9,08,000
Other Information:
1) Depreciation as per Income Tax Rules on Motor Car for professional use is ₹6,000. Solution:
2) 1/3rd of Motor Car expenses relate to his personal use. Working Note:
3) The rate of Depreciation on Surgical Equipment is 15%. The W.D.V. of equipment brought forward from earlier year was ₹23,000.
4) Audit fees include Income Tax Appeal expenses ₹5,000.
You are required to compute taxable income from Profession for the A.Y. 2022-2023.

Solution:

Computation of Taxable Income from Profession for the A.Y 2022-2023

Particulars ₹ ₹
7,70,000
Professional Receipts 2,55,000
i) Visiting Fees 2,75,000 - 5,94,750
ii) Consultation Fees 1,25,000 1,75,250
iii) Sale of Medicines 1,15,000
iv) Operation Theatre Rent
2,20,000
Less: Professional Payments 1,80,000
i) Clinic Rent
ii) Staff Salaries 9,000
iii) Electricity & Water 4,000
iv) Medical Books 80,000
v) Purchase of Medicines 40,000
vi) Motor car expenses (Professional = 2/3rd of ₹60,000) 20,000
vii) Audit Fees 8,000
viii) Staff Welfare Expenses 6,000
ix) Entertainment Expenses 6,000
x) Depreciation on Motor car (Professional use) 21,750
xi) Depreciation on Surgical Equipment (W.N.)

Taxable Income from Business

Problem-:4
Computation of Income from Profession:
Working Note:

Working Note: 23,000
Depreciation on Surgical Equipment: - 8,000
Surgical Equipment W.D.V. …………………
Less: Equipment Sold during the year
15,000
Add: Purchased during the year +1,30,000
Balance as on 1st April 2020 …………………..
Therefore, Depreciation @ 15% on Balance ₹1,45,000 = ₹21,750
1,45,000

Problem-:4
Solution:

Problem-:5

The following is the Receipts and Payment A/c of Dr. Kiran Rakibe for the financial year 2020-21. From the additional information provided under.
compute his Income from Profession for the A.Y. 2021-22.:

Receipts ₹ Payments ₹

To Balance b/d 10,000 By Clinic Rent 1,08,000
To fees at clinic 2,00,000 By Repairs & Maintenance of Clinic 28,000
To visit fees 1,50,000 By Repayment of HSg Loan
To Salary from college 1,76,000 By Membership fees of Doctors Association 3,00,000
To LIC Policy matured 3,00,000 By Purchase of Drugs 22,000
To Dividend from Indian Company 1,00,000 By Income Tax 60,000
To Interest on Debenture By Public Provident fund 10,000
To Rent of medical equipment 50,000 By LIC Premium 70,000
To sale of Drugs 12,000 By Loan to friend 16,000
To fixed Deposits Matured 70,000 By Balance c/d 20,000
30,000
1) Closing stock of Drugs ₹6,800. 4,64,000
2) Outstanding salary of employees is ₹30,000. 10,98,000
3) Sale of Drugs is made to Patients. 10,98,000
4) Depreciation Allowed on medical equipments ₹7000.

Solution:

Solution:

Computation of Taxable Income from Profession of Dr. Kiran Rakibe for the A.Y 2022-2023

Particulars ₹ ₹
4,32,000
Professional Receipts 2,00,000
i) Fees at Clinic 1,50,000 - 2,48,200
ii) Visit Fees 1,83,800
iii) Rent of Medical Equipment 12,000
iv) Sale of Drugs 70,000

Less: Professional Payments 1,08,000
i) Clinic Rent 28,000
ii) Repairs & Maintenance of Clinic 22,000
iii) Membership Fees of Doctors Association 53,200
iv) Purchase of Drugs (₹60,000 - ₹6,800) 30,000
v) Outstanding Salaries of employees 7,000
vi) Depreciation on Medical Equipment

Taxable Income from Profession

Problem-:4
Computation of Income from Profession:

Unit-2: HEADS OF INCOME

INCOME FROM
CAPITAL GAIN

Prepared & Presented by,
Prof. Vikrant D. Palatshaha

MKSSS’s Shri Siddhivinayak Mahila Mahavidyalaya, Karvenagar, Pune-52



Capital Gain:

• Any gain arising from the transfer of a capital asset during a previous year
is chargeable to tax under the head “Capital Gain” in the immediately
following assessment year, if it is not eligible for exemption under Sec. 54,
54B, 54D, 54EC, 54G, and 54 GA.

• Capital Gain (u/s 48) means any profit or gain arising from the Sale /
Transfer of a Capital Asset.

Capital Asset:

• Capital Asset means property of any kind held by an assessee. However, it
does not include :

 Stock, Stores, Raw Materials held in business
 Gold Bonds
 Rural Agricultural Land
 Personal effect like Furniture, Motor Car, A/C, Refrigerator etc.
• “Jewelry” held for personal use is treated as Capital Asset. Jewelry

includes ornaments made of Gold, Silver, Platinum or any other Precious
Metal / Stone.
• Capital Assets are of two types :

1) Long - Term Capital Assets
2) Short - Term Capital Assets

Short Term Capital Assets:

“Short Term Capital Asset” means a capital asset held by the assessee for not
more than 36 months, immediately prior to its date of transfer. However, the
following assets are treated as short term capital assets if they are held for
not more than 12 months, they are:
 Equity or Preference Shares in a Company.
 Securities like debentures, government securities listed in a recognized

stock exchange in India.
 Units of UTI.
 Units of Mutual Fund.

Long Term Capital Asset:

An asset which is held by an assessee for more than 36 months, immediately
before its transfer, is called Long Term Capital Asset.
In other words, an asset, which is transferred on or after 36 months of its
acquisition by assessee, is call Long Term Capital Asset.