Profits and Gains of Business or Profession (PGBP) refer to the income earned by individuals, firms, or companies from any business activity or professional service. In the Indian taxation system, this is one of the five heads of income under the Income Tax Act, 1961. It includes all earnings generated through trade, commerce, manufacturing, freelancing, consultancy, or any other commercial or professional activity.
This head covers both ongoing business income and incidental receipts such as compensation, interest on delayed payments from clients, or benefits in kind. For professionals like doctors, architects, consultants, or freelancers, earnings from their practice also fall under this category.
From a compliance perspective, anyone earning income under PGBP must maintain proper books of accounts, file income tax returns under the correct ITR form (like ITR-3 or ITR-4), and adhere to provisions related to tax audits if applicable. Moreover, deductions for expenses directly related to the business—like rent, salaries, raw materials, or depreciation—can be claimed to arrive at the taxable income.
Understanding PGBP is crucial for tax planning, claiming valid deductions, and ensuring compliance with regulatory norms. It also plays a vital role during GST registration, MSME registration, or loan applications, where proof of business income is required.
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