📘 Section 26 – Profits and Gains of Business or Profession (Income-tax Act, 2025)

💼 1. Core Business Profits

Income includes profits from any business or profession carried on during the year.

Example:
A retailer earning ₹12 lakhs from sales reports it as business income.

💰 2. Compensation & Termination Receipts

Compensation for termination/modification of contracts, agency, or management is taxable.

Example:
A distributor receives ₹20 lakhs for termination of dealership → taxable as business income.

If the government takes over a business and pays compensation, it is also taxable.

🤝 3. Income of Trade Associations

Income from services provided by associations to members is taxable under PGBP.

Example:
A chamber of commerce charging members for certification services → taxable income.

🌍 4. Export Incentives

Export benefits like duty drawback, cash assistance are included.

Example:
Exporter receiving ₹5 lakhs as duty drawback must include it in business income.

🎁 5. Benefits & Perquisites

Any benefit arising from business—cash or kind—is taxable.

Example:
A dealer receives a car as an incentive → fair value is taxable.

👨‍💼 6. Partner’s Remuneration

Salary, bonus, or commission received by a partner from a firm is taxable.

Example:
Partner receiving ₹4 lakhs as remuneration reports it as business income.

🚫 7. Non-Compete Fees

Amounts received for not carrying out business or not sharing know-how are taxable.

Example:
A professional receives ₹15 lakhs to not start a competing consultancy → taxable.

🛡️ 8. Keyman Insurance

Proceeds from Keyman insurance policies are taxable.

Example:
Company receives ₹8 lakhs on maturity → taxable.

📦 9. Conversion of Inventory

Stock converted into capital asset is taxed at fair market value.

Example:
Builder converts unsold flats into investment property → FMV becomes taxable under PGBP.

💥 10. Sale/Discard of Deducted Assets

If assets (fully deducted earlier) are sold or destroyed, receipts are taxable.

Example:
Machinery fully expensed earlier is sold → sale value taxable.

🎲 11. Speculative Business

Speculative transactions are treated as a separate business.

Example:
Intraday trading loss cannot be adjusted with normal business profit.

🏠 12. Exclusion – House Property

Rental income from residential property is not business income.

Example:
Rent from house is taxed under Income from House Property, not PGBP.

✅ Practical Takeaways

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