INCOME TAX UNIT-4 INCOME FROM BUSINESS FULL EXPLANATION | Degree 4th sem Income tax unit-4🎯💯

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[00:00:00]Hello dear students, welcome back to our YouTube channel learn with Sahira. In this video we are going to see the complete and clear explanation of income from business from unit number four of income tax subject which is for degree fourth semester students. Students in unit number four we do have two different topics. One is income from business and the other one is income from profession. In this video we are going to focus on topic number one which is income from business. In our next video, we are going to focus on topic number two, which will be income from profession. So definitely watch the video till the very end in order to get perfect with the concept income from business. Do not skip the video, watch it till the very end. And if you're new to our YouTube channel, learn with Sahara. Subscribe it for more exam preparation videos. Students, one more important thing. I have already prepared damn sure important question and answers notes for all subjects and languages of degree fourth semester. If you want these notes, you can message me on my Instagram. My Instagram id is learnwith sahira link is available in this video description. Just message me want notes along with your group and semester. I will be giving you the access to all the notes but remember these are paid notes.

[00:01:04]Yes there is a small payment for the notes but believe me you are going to see excellent results with these notes.

[00:01:09]And uh students if you want to watch all explanation videos of this subject do visit our YouTube channel's playlist is named income tax semester for BCOM. In that playlist you will be finding all explanation videos. That playlist link is also available in this video description. Do check it out. Without getting late, let us get started. Guys, before going into the problem or solution, first we need to get perfect with the profarma. So, I am showing you the propharma here on the screen. Please take a screenshot or if you're using my notes already, I have included this profarma. And if you're using any other book in that also you will be finding this pro profarma. So, profarma for income from business will be starting like this. Computation of income from business for the assessment year.

[00:01:50]Whatever the year they will be mentioning, you have to mention it here.

[00:01:53]Okay. So this is going to be the heading. After that you will be drawing a box or a table in which we will be having particulars amount amount. If you want to take two amount columns, you can take it like that. Or if you want to take only single amount column, you can take it single amount column also. First we will be starting with net profit as per profit and loss account. This will be given in the question. Question be value. You need to take that value here.

[00:02:16]Net profit as per profit and loss account it will be given in the question. You have to note down the value. Then we have add inadmissible expenses. Guys, inadmisible expenses expenses are nothing but the expenses which are not related to the business.

[00:02:30]Okay. Whatever the expenses they are mentioning in the question, you have to check whether it relates to the business or it relates to the personal. If it is business related expense, you should not take it in the inadmissible expenses. If it is personal expense, you have to note it down. What are all the things which you need to consider in inadmissible expenses? You can see on the screen.

[00:02:51]Income tax paid, clarity, charity and donation, household expenses, loss on sale of motor car. If they directly give motor car, you should not take. But if they give you loss on sale of motor car, you should take life insurance premium of a proprietor, interest on capital, provision for bad dips. If they directly give you bad dips, you should not take.

[00:03:09]But if they give you provision for bad dips, you can take salary to propritor.

[00:03:12]So all these things you need to add.

[00:03:15]Okay, you need to add all these things.

[00:03:17]Inadmissible expenses you need to add.

[00:03:19]You need to take this net profit as per profit and loss account and whatever the expenses inadmissible expenses you are getting you need to add all these amounts you will be getting the total here is total you will be finding. After that we have less incomes to be shown under other heads. Here you will be having rent received, interest from bank, dividend received, refund of income tax. So these things you have to take here if they give you in the question question so you take it here and whatever the amount you got here from this amount you need to minus this amount then you will be getting the total amount. Okay, you are adding these uh inadmissible expenses and this uh net profit you will be getting the total from that total less these amounts you will be getting the total again and then we have deduction guys in this we have depreciation t sales tax paid excise duty most of the time they will be giving you depreciation so yes whatever the amount you are taking here that amount you should minus or deduct it from this amount you will be getting income from business is the proarma definitely get perfect with this profarma easily you will be scoring ing full marks from income from business.

[00:04:26]This is very easy topic guys. So yes, here I'm showing you the question. If you don't have this question, just take a screenshot. But the students who are using my notes, you are having this question in your notes. So I have mentioned uh the question, please have a look on that question. Or else if you are using any book, you will be having this question in your book as well. Mr. Gopal submits the following particulars for the year ended 31st March 2020.

[00:04:47]Compute his income from business. Like this they will be asking you the question and they will be giving you profit and loss account. And now from this you need to identify which thing we need to take in the propharma and which thing we should not take in the propharma and what you have to take what you have to not take already we have discussed in the propharma and at the same time they will be giving you additional information whatever the values or whatever the things they have given in the additional information definitely you have to note it down in the proarma okay whether it is business or personal you should not leave if they give you any additional information basically business related If here some business related thing is there but it comes in personal business related person guys here is our question. The moment you see the question first look at net profit. Okay just look at net profit and whatever the value they have given you as net profit you have to mention the value here as net profit as per PNL account. Okay, first note it down this net profit value. After that just look at these things which things we need to take in the proarma and which things we need to ignore. Do we take salary guys?

[00:06:02]No, we don't take salary. Do we take telephone expenses? No, we don't take telephone expenses. Do we take repairs?

[00:06:09]No, we don't take repairs. But if you have a look at additional information, they have clearly stated repairs included in capital expenditure 12,500.

[00:06:18]Current year repairs 5,500. Clearly they have said that it includes in capital expenditure right how much is the amount 12,500 because they gave us in the additional information we are going to take that value I just mentioned repair capital expenditure 12,500 just ignore this 5,500 okay after that come to legal expenses do we take legal expenses no motor car expenses no but if they give you loss on sale of motor car you have to take but if you if they gave you motor car expense you should not take.

[00:06:51]Do we take income tax? Yes, we need to take income tax. How we are going to take income tax? Just mention income tax. How much is the amount guys?

[00:07:01]It is 10,000. Just take 10,000. Okay.

[00:07:07]After that we have security transaction tax. Yes, we need to take this. Then we have provision for taxation. Both you have to take security transaction tax. How much is the amount? It is 6,000.

[00:07:27]Provision for taxation.

[00:07:36]How much is the amount? Amount is 3,000.

[00:07:38]The same amount you have to take. Then we have interest on loan. Guys, do we take interest on loan?

[00:07:47]If you see in the additional information, they have mentioned interest paid on loan for purchase of machinery. You have to take this. How much it is? It is 12,000. Okay, let me mention interest paid on loan of machinery. Okay, mention it clearly. I just said M. How much is the amount guys? It is 12,000 right?

[00:08:14]Interest on loan 12,000. Just take 12,000. Okay. After this just go to next. Do we take bad debts? No, you should not take bad debts. But you can take provision. Provisions for bad debts. Provision for bad debts how much it how much it is? 8,600.

[00:08:31]So let me write it. Provision for BD. I'm writing bad debts but you have to write it completely 8,600 then depreciation definitely you have to take this depreciation here itself how much is the amount depreciation how much it is it is 45,000 next general expenditure no we should not take general expenditure but you see in the additional information they have said general expenditure included 15,000 paid as penalty for violation of income tax rules additional information right so let me write it penalty how much it is it is 15,000 okay we are done then come to this side by income from house property income these are expenses that's the reason we took took it here. But if we talk about income now, we are going to take income things under income to be shown on other overheads. Oh is nothing but other overheads or other heads we can say.

[00:09:49]Okay, other heads not overheads other heads. So yes what we are going to take this one by income from house property gross profit just ignore okay net profit only we will be considering income income from house property how much is the amount guys it is 6,000 just take 6,000 next profit on sale of land take it profit on sale of land. How much is the amount?

[00:10:26]70,000.

[00:10:29]Okay. What's about interest on securities? Take it. Interest on security. You have to write it neatly in your answer booklet. Okay. I'm just writing it like that. How much it is? It is 1,000, guys. 1,000. Done. Do we take bad debts recovered? No, we should not take bad debts recovered. We are done with this profit and loss account. Okay.

[00:10:51]Now you have to check additional information whether you have taken all the things or not because as I already said you whatever they are giving in the additional information that should be also taken down. We have taken this interest paid uh on loan from purchase of machinery then we have took this as per the income tax act allowable depreciation if they give depreciation in the additional information that should be considered as deduction. Okay.

[00:11:15]So just write depreciation here.

[00:11:19]Depreciation.

[00:11:20]How much is the amount guys? It is 30,000. Done. Yes. Then repairs we took.

[00:11:27]Then they also gave us proprietor salary included uh in salary 25,000. It is also expense, right? So write it here.

[00:11:39]Proprier salary here. It is 25,000. Simple. Okay.

[00:11:45]Note down all the things. Then general expenditure as penalty we already took.

[00:11:50]So we are done. Now we have to do the calculation part. How we are going to do the calculation part? I think it's looking messy but you have to do it correctly in the examination. Okay. So you have to add all these amounts and you have to take the total here. Okay.

[00:12:06]Amounts add 12,500 + 10,000 + 6,000 3,000 12,000 8,600 45,000 15,000 25 How much it is? It is 137 1 is may add 5 lakhs 32,400 5 lakhs 32,400 how much it is it is 669500 69500 it has been clearly mentioned right here add so don't get confused sometimes you might get confused but don't get confused you have to add add all these you will be getting this total Okay, let me recheck again.

[00:13:04]Check option checkal 6695.

[00:13:14]After that what you need to do guys amount deduct just add all these first let us just take amount 669500 that's what right yeah - 6,000 - 70,000 - 1,000 925 so let me take 9 250.

[00:13:46]Now minus this amount from this 59 2500 minus 30,000. It is 56 250.

[00:13:59]This is our answer which is nothing but income. Sorry, this is our answer which is nothing but income from business.

[00:14:05]This is the way how you are going to do this guys. Here we have our another question.

[00:14:13]Mr. Ram submits the following particulars for the year ended 31st March 2020. Compute his income from business. Profit and loss account has been given. We will not take salaries as discussed. Uh telephone expenses we will not take it. Rent we will not take it.

[00:14:29]Legal expenses we will not take it. But additional information has also been given. Here they have said in legal expenses 60% of expenses are incurred per personal cases. So definitely personal expense you will be taking right. So whatever the amount they have given here legal expense 60% okay like this amount given and do it 60% whatever the amount you are getting you have to take that amount here okay after that do we take motor car expenses? No we will not take motor car expenses. But if you see in the additional information 50% has spent for personal purpose. Personal purpose is definitely you have to do motor car expenses 44,000 50% whatever the amount you are getting you need to take it here which is 22,000 after that what do we have income tax definitely we need to take birthday party expenses definitely we need to take personal expense festival expenses we need to take festival expenses but in additional information they have clearly mentioned festival expenses incurred for celebrations in business business related we will just ignoring but if they give you directly you have to take GST don't take bad debts don't date provisional for doubtful debts take it depreciation you take it these are inadmissible expenses after that net profit you already know you have to take it here in the amount section then gross profit to though rent from staff quarters you should not take this because it is related to business business income to don't take it profit on sale of land you will be taking it in incomes to be shown under other heads Profit on sale of papers it is related to business don't take it. Bad debts recovered don't take it because it is assumed that it has covered earlier.

[00:16:19]Okay. So don't just take it. Don't take it. Okay. So guys add all these amounts and whatever the total you are getting that total you need to add with this net profit as per profit and loss account.

[00:16:32]Add both of them how much you will be getting? You will be getting 8 lakhs 38,400.

[00:16:38]After this whatever the amount you got here in incomes to be shown under other heads that you need to deduct it from this amount because less it has been clearly mentioned right less means you have to deduct this amount from this amount you will be getting this total which is 7 lak 74,400 after that in deductions also whatever the amount you got that deduction amount you have to deduct from this amount you will be getting income from business.

[00:17:06]This is the way how you are going to solve the problems.