How is income from business or profession computed?

Income chargeable to tax is computed after deducting the following:

1. Expenditure incurred during the previous year wholly and exclusively for the purpose of the business;

2. After deducting allowances and deductions provided in Sections 30 to 43D of the I.T. Act. 1961;

3. The following expenses are not alloweable:-

- Expenditure relating to a discontinued business;

- Expenditure incurred before setting up of a business;

- Provisions, anticipated losses, reserves or contingent liabilities, bad debts etc. which have not arisen during the previous year.

Source: Income Tax Department