Manner of computing profits and gains of business or profession
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
The income referred to in section 26 shall be computed as per the provisions of sections 28 to 60, except section 58.
FAQs on Section 27 of Income Tax Act 2025
1. What does Section 27 deal with?
Section 27 outlines the method for computing income under the head Profits and Gains of Business or Profession.
2. Whose income is computed under this section?
It applies to taxpayers whose income falls under Section 26, i.e., income classified under Profits and Gains of Business or Profession.
3. How should profits and gains be computed?
As per Section 27, income shall be computed in accordance with Sections 28 to 60, excluding Section 58.
4. Why is Section 58 excluded from this computation?
The Act explicitly excludes Section 58 — indicating that its provisions do not apply for this specific computation.
5. What does Section 28 to Section 60 contain?
These sections lay out allowable deductions, depreciation rules, disallowed expenses, and special provisions for different types of businesses. Each has its own set of criteria:
- Section 28 to 33: Standard deductions, bad debts, insurance, etc.
- Section 34 to 43: Special provisions including depreciation and foreign exchange.
- Section 44 to 60: Covers amortisation, scientific research, specific businesses, restoration funds, etc.
6. Where can I find the full list of Sections 28 to 60?
You can find the detailed list on AUBSP’s official Income-tax Act 2025 page, under the Profits and Gains of Business or Profession chapter.
7. Does Section 27 provide formulas or numerical methods?
No. It provides a reference framework — you must use provisions of Sections 28 to 60 to arrive at the actual income figure.
8. Can businesses deviate from this method of computation?
No. Computation must follow the prescribed sections unless otherwise provided in special cases under other sections.
9. Are presumptive income schemes covered in this section?
No. Section 27 allows computation only as per Sections 28 to 60, excluding Section 58. Since presumptive schemes under Section 58 (residents) and Section 61 (non-residents) fall outside this scope, they do not apply.
10. Does Section 27 override other general principles?
It acts as a gateway provision, directing how computation must be done. It is not overriding, but dependent on Sections 28 to 60.
Section 27 plays a pivotal role as a computational bridge between the recognition of business income (under Section 26) and the detailed mechanics of deductions, allowances, and disallowances found in Sections 28 to 60 (excluding 58). It does not introduce new concepts but acts as a linking provision, ensuring income is calculated precisely as per law.
