Bhalla started with a grocery shop. Any income arises from any business or any profession is chargeable to tax under the head of “Profit and Gains from Business and Profession”.
Now, here, Mr. Bhalla is a businessman, engaged in grocery business so his income is chargeable to tax under the same head.
But there are some conditions to it.
1. It is possible that he is exempted from tax means his business income doesn’t exceed the specified limit. In that case, no tax liabilities have to furnish.
2. It is possible that he doesn’t keep records and pay taxes on estimated basis or may not pay and also his business income exceeds to the exempted limit. In that case:
a) According to section 44AA of the income tax act, Mr. Bhalla, being an individual, has to maintain and furnish all books of accounts, records, documents, evidences, traces, if his business income exceeds ₹150,000 or gross receipts or total sales or turnover (whichever term is being in force) is equal to or more than ₹25,00,000 in any three immediately or consecutive preceding the previous year. So
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Bhalla opts for section 44AD, then, he has to consider certain points:-
i.) He shall not be allowed to claim any expenses or depreciation or any other expenses covered under section 30 to 38. ii.) He shall not be allowed to deduct any remuneration, salary, or interest paid to his partner (if any) under section 40(b). iii.) Now, the above two sections i.e. section 44AA (Maintenance of books of accounts) and section 44AB (Furnishing of Tax Audit) is not required. iv.) He is liable to pay Advance Tax and follow the prescribed rules which will apply. However, he may opt to pay Advance Tax by 15thMarch of Financial Year.
v.) If he finds any disallowance of any expenses, in that case, it will be assumed that it has been already under taken and made in calculation of estimated profit.
Now, while calculating the taxable income from the grocery some principals are to be considered by assesse (here, Mr.
ii) If one is the owner or operator, liability may attach even if some other
ARB43, Ch.4, Par.9 ?Where evidence indicates that cost will be recovered with an approximately normal profit upon sale in the ordinary course of business, no loss should be recognized...?
Section 183(d) allows a deduction to a taxpayer who engages in for business. The taxpayer must earn a profit for any three years or more. If he does not meet the profit test, his activity is hobby. The gross income should be greater than the deduction in order to qualify for tax deduction under section 183(b)(1).
Ms. Read reported the interest income from the installment promissory note in her 1988, 1989, and 1990 tax returns. However, she did not report any principal income from the stock transfer transaction in her tax return. Mr. Read also
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... on $50,000 of income. A similar situation would occur if one spouse earned a wage limit over the threshold and the other spouse did not. Since a company's payroll system only keeps track of information about its own employees, the spouse with lower earnings would not have the tax withheld but would still be subject to it at tax time.
-Income Taxes: As a sole proprietorship, the income flows directly through the business to the owner. This means that any income the business generates is considered income for the individual, and said individual will be responsible to pay taxes as such. Again no difference between business and owner.
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In the above given case we can say that Miss Priya is the seller while Mr. Ravil is the customer or purchaser of goods. Miss Priya has sold jewelry worth 6 lacs to Mr. Ravil and in exchange received a cheque for the full amount. This cheque on presentment to the bank, was dishonored. Therefore Miss Priya becomes an ‘unpaid seller’.
2.Income taxes:Income earned by the sole proprietorship is income earned by its owner and is taxed as such