Business & Profession-FAQs

Business & Profession: Complete FAQs & Compliance Guide (India)

Running a Business & Profession in India brings specific income-tax rules: keeping books of account, knowing when tax audit (44AB) applies, deciding if presumptive taxation (44AD/44ADA/44AE) fits you, and following cash-payment and TDS restrictions. This page explains each topic step by step—which ITR to use (ITR-3/ITR-4), what books professionals must keep under Rule 6F and how long to retain them, when you can skip books/audit under presumptive, and how partner remuneration/interest is allowed under section 40(b). We’ve cited the Income Tax Department’s help pages, tutorials and tools so you can comply confidently and avoid common disallowances.

Business & Profession — Frequently Asked Questions

If you have profits from any trade, commerce or professional activity (including freelancers/consultants), that’s PGBP income. Use ITR-3 for regular books, or ITR-4 (Sugam) if you’re eligible and opt for presumptive (44AD/44ADA/44AE). The portal’s help clarifies eligibility and that ITR-2 cannot be used if you have PGBP income.

Specified professions (legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, film artist, authorised representative, company secretary, information technology) must keep prescribed books (Rule 6F) and preserve them for 6 years from the end of the relevant assessment year. Rule 6F lists the books and the 6-year retention; the Department’s tutorial repeats the same.

Presumptive schemes reduce compliance—books/audit aren’t required where you validly opt under 44AD/44ADA/44AE (subject to conditions). The official FAQ/tutorials confirm this relief and explain the schemes.

Generally, business: audit if turnover exceeds ₹1 crore, or up to ₹10 crore if both cash receipts and cash payments are ≤5%; profession: audit if gross receipts exceed ₹50 lakh. (Always check current-year instructions.)

Per the ITR-4 FAQs: 44AD turnover limit ₹3 crore if cash receipts are ≤5% (else ₹2 crore); 44ADA limit ₹75 lakh if cash receipts are ≤5% (else ₹50 lakh). 44AE applies to goods carriages (≤10 owned).

If you opt 44AD/44ADA, pay 100% of advance tax by 15 March of the previous year; any tax paid by 31 March is still treated as advance tax. This is stated in the Department’s tax calendar/tutorials and FAQs.

Business cash payments over ₹10,000 to a person in a day are disallowed (₹35,000 for payments for goods carriages), unless covered by Rule 6DD exceptions. See the Department’s official tutorial for details and exceptions.

For resident payees, 30% of specified expenses can be disallowed under section 40(a)(ia) if TDS isn’t deducted/deposited by due dates. The Department’s TDS FAQs capture this consequence.

A firm may claim partner remuneration (working partners) and interest on capital only within the limits of section 40(b), and as authorised by the deed. Use the Department’s “Partners’ Remuneration” tool to compute the allowable maximum.

Tax depreciation is on a block of assets at prescribed rates; additions used <180 days generally get half-year depreciation. The Department’s tools/tables and Form 3CD format reflect the block concept and rate application.

If liable, obtain TAN, deduct at the correct section/rate, deposit TDS (e-payment is mandatory for companies and 44AB cases) and issue Form 16/16A on time. Department pages explain deposit modes (ITNS-281) and certificate timelines.

Failure to maintain/retain prescribed books can attract penalty u/s 271A; official tutorials also note the 6-year retention rule and penalties.

If dues to micro/small enterprises exceed the contractual limit (max 45 days, or 15 days if no agreement), the expense is allowed only on actual payment (not on accrual).

40A(3) disallows cash payments over ₹10,000 (₹35,000 for goods carriages). 269ST restricts cash receipts of ₹2,00,000 or more (per person/day/transaction); breaching it attracts penalty u/s 271DA. Add a brief contrast line so readers don’t mix them up.

Under 44AD, if you opt in and later opt out within 5 years, you’re barred from re-opting for the next 5 AYs; also, declaring lower profit than deemed and having income above the basic exemption triggers books (44AA) + audit (44AB). (44ADA has no 5-year lock-in but similar lower-profit audit rule.)

Closing Notes — Business & Profession

Do the basics right—keep books (Rule 6F), watch cash limits, deduct/deposit TDS, and check if 44AB audit or 44AD/44ADA presumptive applies. Reconcile AIS/TIS, claim valid expenses only, and use the Department’s calculators/tools (depreciation, partner remuneration) to avoid disallowances and notices.

Next steps

Last updated: Oct,2025. Tax thresholds/rates change; if something looks off or you need a scenario added, send us a note and we’ll update quickly.

Business & Profession, FAQs simplified — books, audit, presumptive.
Business & Profession FAQs simplified — books, audit, presumptive.

Disclaimer: The information on this page is for general guidance only and is not tax, legal or professional advice. Laws and thresholds change, and application depends on your facts. While we aim to keep content current (Finance Act, 2025), errors or omissions may occur. Always refer to the Income-tax Act/Rules, CBDT notifications/circulars and consult a qualified advisor. If there is any conflict with the law, the official provisions prevail. TaxBizMantra and the authors accept no liability for actions taken or not taken based on this material; examples are illustrative and do not create a client–advisor relationship.

Key official sources