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ITR Documents: Business and Professional Income

by | May 27, 2024 | Income Tax | 0 comments

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Important keyword: Business and Professional Income, Income Source.

Income from Business and Professional Income

Any income earned by a taxpayer from their business or profession is taxed under the category “Income from Business and Professional.” A business refers to an activity conducted with the goal of earning profits. Therefore, any earnings from such activities are classified as Business Income. On the other hand, a profession involves work that requires specialized knowledge, skills, or expertise. The income generated from such professional work is termed Professional Income.

Document Checklist for Business and Professional Income

PAN

The Permanent Account Number (PAN) is an alphanumeric ID issued by the Income Tax Department (ITD). It is crucial for linking all transactions of a taxpayer with their income, making it an essential document for filing Income Tax Returns (ITR).

Aadhaar

Aadhaar is a 12-digit unique identification number issued by the Unique Identification Authority of India (UIDAI). It is mandatory for resident individuals to provide their Aadhaar details when filing their ITR.

Books of Accounts

Maintaining books of accounts is necessary for accurate financial reporting. This includes:

  • Balance Sheet: This statement reports a company’s assets, liabilities, and shareholders’ equity for a particular year.
  • Profit & Loss Statement/Income-Expense Statement: This document shows the income and gains credited and the expenses and losses debited, reflecting the net profit or loss for a given period. Supporting documents are required for any additional expenses mentioned in the P&L/I&E Statement.

Bank Account Statement

A bank statement detailing business transactions is essential for preparing the ITR. It helps derive details of incomes and expenses, which are used to prepare financial statements like the Balance Sheet and P&L Account.

Cash Register

The cash register records cash transactions and is used to prepare the ITR for the business. It is important to disclose information such as the cash balance as of 31st March and details of cash payments for expenses.

Form 26AS

Form 26AS is a consolidated Tax Credit Statement that includes:

  • Details of taxes deducted from the taxpayer’s income.
  • Details of taxes collected from the taxpayer’s payments.
  • Advance Taxes, Self Assessment Taxes, and Regular Assessment Taxes paid by the taxpayer.
  • Details of refunds received during the year.
  • Details of any high-value transactions (e.g., shares, mutual funds).

It is crucial to check Form 26AS before e-filing the ITR to ensure all tax credits are claimed.

Investment Proofs

Investment proofs are required to claim eligible deductions under Chapter VI-A when filing the ITR for a business or profession. These include:

  • Donation Receipts
  • Fixed Deposit Statements
  • Rent Agreements
  • Other relevant investment documents

Read More: ITR Documents: Income from other sources

Web Stories: ITR Documents: Income from other sources

Official Income Tax Return filing website: https://incometaxindia.gov.in/

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