Understanding Business and Professional Income

Definition: Business Income: Earnings from activities aimed at making a profit. Professional Income: Earnings from work requiring specialized skills or expertise. Essential Documents: PAN: Alphanumeric ID for linking transactions to income, crucial for filing Income Tax Returns (ITR). Aadhaar: 12-digit unique ID mandatory for filing ITR.

Books of Accounts: Balance Sheet: Reports a company’s assets, liabilities, and shareholders’ equity for the year. Profit & Loss Statement: Shows income, gains, expenses, and losses, indicating net profit or loss. Supporting documents are needed for additional expenses mentioned.

Bank Account Statement: Details Business Transactions: Helps prepare financial statements by detailing incomes and expenses. Cash Register: Records Cash Transactions: Essential for preparing ITR, disclosing cash balance and payments as of 31st March.

Form 26AS: Tax Credit Statement: Includes TDS, TCS, advance taxes, self-assessment taxes, refunds, and high-value transactions. Investment Proofs: For Deductions: Required for claiming eligible deductions under Chapter VI-A, including donation receipts, fixed deposit statements, and rent agreements.