12 December 2016
If the AO wants to make assessment u/s 143(3) he has to serve notice to the assessee u/s 143(2) within a period of six monhts from the end of the financial year in which return is furnished. similarly if the AO wants to make assessement u/s 147 he has to serve notice on the assessee with in the period of four years/ six year depending on the case from the end of the relevant asst year for any income escaping assessment.
04 January 2017
I have lost goods worth rs20,000 against which I got insurance compensation of rs 25,000.then difference i.e rs5,000 taxable as business income under which head?
14 July 2024
The taxation of insurance compensation received for lost goods depends on how the compensation amount is treated in your books of accounts and the specific provisions of the Income Tax Act, 1961. Here’s a general guideline:
### Taxation of Insurance Compensation:
1. **Nature of Compensation:** - Insurance compensation received for lost goods is typically treated as income under the Income Tax Act.
2. **Business Income:** - If the lost goods were part of your business inventory or assets, any insurance compensation received would generally be considered as part of your business income.
3. **Taxable Amount:** - In your case, you received insurance compensation of Rs 25,000 for goods worth Rs 20,000 that were lost. This results in a surplus of Rs 5,000 (Rs 25,000 - Rs 20,000).
4. **Taxability:** - The surplus amount of Rs 5,000 would be taxable under the head "Profits and Gains of Business or Profession" as it pertains to your business income.
### Treatment in Books of Accounts:
- **Debit:** Record the insurance compensation received (Rs 25,000) as income in your books of accounts under the appropriate income head. - **Credit:** Record the loss of goods (Rs 20,000) in your books as an expense under the relevant expense head, such as "Loss on Inventory" or "Loss from Fire/Theft/Damage," depending on the nature of the loss.
### Reporting in Income Tax Return:
- Include the entire amount of insurance compensation received (Rs 25,000) as income in your income tax return under the appropriate schedule for business income.
### Conclusion:
The difference of Rs 5,000 between the insurance compensation received and the value of the lost goods is taxable as business income under the head "Profits and Gains of Business or Profession." Ensure that you maintain proper documentation and records to support these transactions for income tax purposes. If you have specific concerns or additional details about your situation, consulting with a tax advisor or chartered accountant would provide tailored advice based on current tax laws and regulations.
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