Section 26: income under head "profits and gains of business or profession"

What is chargeable under this head

Section 26(2) includes, among other items:

• Profits and gains of any business or profession carried on by the assessee at any time during the tax year
• Compensation or payment for managing the affairs of an Indian company (or, in India, any other company), holding an agency in India, or in connection with termination/modification of such management, agency or a business contract
• Compensation for vesting the management of property or business in the Government (including a Government-owned/controlled corporation)
• Income of a trade, professional or similar association from specific services performed for its members
• Profit on sale of import licences, cash assistance against exports, duty drawback, duty remission, or other export incentives
• The value of any benefit or perquisite arising from business or the exercise of a profession, in cash or in kind or both
• A partner's interest, salary, bonus, commission or remuneration from their firm, to the extent allowed as a deduction to the firm under section 35(e)
• Amounts received under a non-compete agreement (not to carry out any activity relating to a business/profession) or a non-disclosure agreement (not to share know-how, patents, trademarks or similar rights), subject to specific carve-outs including certain capital gains and Montreal Protocol compensation
• Sums received under a Keyman insurance policy, including bonus allocated on it
• The fair market value of inventory as on the date it is converted into, or treated as, a capital asset
• Sums received or receivable on demolition, destruction, discarding or transfer of a capital asset (other than land, goodwill or a financial instrument) whose full cost was earlier allowed as a deduction under specified provisions

Speculation business treated separately

Where speculative transactions carried on by an assessee are of such a nature as to constitute a business, that speculation business is deemed to be distinct and separate from any other business of the assessee (section 26(3)).

Residential letting is excluded

Income from letting out a residential house or part of it by the owner is not included under this head - it is chargeable only under "Income from house property" (section 26(4)).

Frequently asked questions