Introduction
Assessable profit is also known as the taxable profit/income. This is calculated to determine a taxpayers taxable income in a financial year, which will be subject to income tax. This income is based on the gains and losses earned by the taxpayer in a year. The term 'assessable' means such income that has to be assessed for income tax purposes. Usually, all kinds of income earned/accrued or received are assessable profit. Some income are eligible for tax exemptions and deductions and are not considered as a part of assessable profit.
What is Assessable Profit?
Here is the way to compute assessable profit under Indian income tax provisions:
Consider income earned under all the heads such as income from salary, income from house property, profits & gains from business or profession, capital gains income and income from other sources and add those up. The resultant figure will be the gross total income.
Deduct all the eligible investments made by the taxpayer during the financial year from the gross total income. The net figure will be the net taxable income on which tax will be assessed.
To arrive at total income earned under different heads, the taxpayers will have to deduct allowable expenses. For instance, a taxpayer having salaried income can deduct the professional tax, standard deduction and then arrive at the final figure for taxable income from salary head. Also, business taxable income can be arrived at by deducting the business related expenses like rent, power, fuel, depreciation, and so on.
