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Apart from normal business or profession income,Certain Other incomes are also taxed under PGBP as given below

Section 28

The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession",—

Profits and gains of any business or profession

which was carried on by the assessee at any time during the previous year ;

 

Income of Association from Members

(Example:Trade Association,Members Asssociation0

If association provide some service to members and charge money from its members, then the amount received by the Associaiton will be PGBP Income

 

Interest/Salary of Partners from Partnership firm

Upto the amount of deduction in Section 40(b)

Refer Section 40(b)

 

Non Compete Fees

Sometimes, Money is received from competitors

for not doing business or profession

or

not sharing know-how, patent, copyright, trade-mark, licence, franchise etc

which is required to manufacture article or thing

 

Exceptions:-

 Non Compete fees does not include

  1. Amount Received on Transfer of Right to Manufacture, produce or process any article or thing or right to carry on any business or profession.This is taxable under Capital Gains. Example:-Sale of license
  2. Compensation Received from the multilateral fundof the Montreal Protocol on Substances that Deplete the Ozone layer under the United Nations Environment Programme, in accordance with the terms of agreement entered into with the Government of India 

Effect of Amendment

EARLIER

NOW

As per Section 28,

Non Compete fees

i.e. fees for not doing any business

is taxable as PGBP Income

As per Section 28,

Non Compete fees

i.e. fees for not doing any business or professions

is taxable as PGBP Income

Exceptions

Non Compete fees does not include

Amount Received on Transfer of Right to Manufacture, produce or process any article or thing

or right to carry on any business.

This is taxable under Capital Gains.

Example:- Sale of Business is taxable under Capital Gain and not PGBP

Exception

Non Compete fees does not include

Amount Received on Transfer of Right to Manufacture, produce or process any article or thing

or right to carry on any business or profession

This is taxable under Capital Gains

Example:- Sale of Business or Profession is taxable under Capital Gain and not PGBP


Export Incentives

  1. Profits on sale of a licence

(granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947)

  1. Cash Assistance

Received or receivable by any person against exports under any scheme of the Government of India 

  1. Drawback

Any duty of customs or excise re-paid or re-payable as drawbackto any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971 ;]

  1. Profit on the transfer of the Duty Entitlement Pass Book Scheme,
  2. Duty Remission Scheme

under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);]

  1. Profit on the transfer of the Duty Free Replenishment Certificate,

being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992

 

Any perquisite or benefit

This may be monetary or non monetary or connected with business or not

 

Any amount received from Keyman Insurance Policy

It is a insurance policy undertaken for key management personnels of companies. In this case, if the insured person (key management personnel) dies or is not able to work, the company receives certain amount form insurance company.This amount if received is taxable under PGBP

 

Compensation on Termination of Service

It may be received in following cases

Compensation received by

When Received

Any Person handling affairs of Indian Company

On the termination of his management or the modification of the terms and conditions relating thereto of

Any Person handling affairs of Foreign Company

On the termination of his management or the modification of the terms and conditions relating thereto of

Agent

On Termination or modification of Agency

Any Person

On Control taken over by Government or Government Company

 

Section 35AD Assets Sold/Discarded/Demolished (Section 28)

In this case, Sale Proceeds if any will be taxable as PGBP as per Section 28

(This does not cover case, where Asset used for some other business )

(Refer Section 35AD)

 

  1. Income Tax
  2. PGBP Income
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com.
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