1.

Define Business
"business" includes any trade, commerce or manufacture or any adventure or concern in the
nature of trade, commerce or manufacture;
2. What is profession?
An income from profession means the income earned due to the skill you possess (intellectual
skill or a manual skill). As per the Income Tax Act, income from such profession will be
taxable under the head 'Profits and Gains of Business and Profession'.
3. What is vocation?
So vocation simply means any type of activity in which a person is engaged and he earns his
livelihood from such activity. Any gain or receipt arising out of vocation is certainly taxable
under this head of income. Example : Writing of articles in the magazines is also vocation.
4. What you mean by capital Asset?
"capital asset" means property of any kind held by an assessee, whether or not connected with
his business or profession, but does not include—
any stock-in-trade, consumable stores or raw materials held for the purposes of his business or
profession; personal effects, that is to say, movable property (including wearing apparel,
jewellery and furniture) held for personal use by the assessee or any member of his family
dependent on him; agricultural land in India;
5. What is capital gain?
Capital gain can be defined as any profit that is received through the sale of a capital asset.
The profit that is received falls under the income category. Therefore, a tax needs to be paid
on the income that is received. The tax that is paid is called capital gains tax and it can either
be long term or short term.
6. What is cost of acquisition and cost of improvement?
the cost of acquisition of the asset shall be deemed to be the cost for which the previous
owner of the property acquired it, as increased by the cost of any improvement of the assets
incurred or borne by the previous owner or the assessee, as the case may be.
Cost of improvement is the capital expenditure incurred by an assessee for making any
addition or improvement in the capital asset. It also includes any expenditure incurred in
protecting or curing the title
7. What is formula to calculate indexed cost of acquisition
(Index for the year of sale/ Index in the year of acquisition) x cost.
8. What is inflation
CII or Cost Inflation Index is notified under the Income-tax Act, 1961, every year. It is
popularly used to calculate the "indexed cost of acquisition" while calculating capital gains at
the time of sale of any capital asset.
9. List out tax free incomes under the head of income from business.
Dividend from an Indian company / UTI
• Refund from LIC
• Interest on POSB a/c
• Income tax refund
• Gift from relatives
• Agricultural income
• Bad debts recovered but disallowed earlier