Deemed Business Profits

 9. What is meant by deemed business profits?

Deemed business profits are earnings that tax laws treat as business income, even if you did not actually earn or record them as profit. Governments use these laws to stop businesses from hiding money. [1, 2]

Here are the most common examples:

• Cancelled Debts: If a supplier forgives a debt that you already deducted as a business expense, the forgiven amount is "deemed" profit.
• Recovered Bad Debts: If you write off a customer's unpaid bill as a loss, but they pay you back later, that money is deemed profit.
• Asset Sales: If you sell a business asset for more than its book value, the extra money is treated as profit. [2, 3, 4, 5]

You can learn more about these rules on the Income Tax Department of India website.

[1] https://www.krayonnz.com/user/doubts/detail/61bcac2b690b430041f8204d/explain-deemed-profits

[2] https://www.taxtmi.com/tmi_notes?id=1493

[3] https://www.incometaxindia.gov.in/w/section-41-3

[4] https://www.caclubindia.com/articles/section-41-deemed-profits-45530.asp

[5] https://www.bajajfinserv.in/investments/section-38-income-tax-act