Significance of business codes in ITR forms
CBDT has changed nature of business codes for income tax return forms from A.Y. 18-19. Before filing of Income tax return, correct business sector along with correct business code has to be selected.
Most of us select business codes recklessly without considering our actual nature and do’s of business. Here is an article mentioning the significance of business codes in self assessment process:
- For considering eligibility for presumptive computation: The benefit of presumptive computation of income is available only in case of specified nature of business. In case the selected business codes does not fall in the specified business codes an intimation u/s 143 will sent to wrong computation of income. The only remedy available to you is to file revised return or apply to rectification of return,
- The facility of special computation of income is eligible for following class of business:
- Special provision for deduction in the case of trade, professional or similar association
- Special provision for computing profits or gains of business on presumptive basis
- Special provision for computing profits or gains of profession on presumptive basis
- Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages
- Special provisions for computing profits and gains of retail business (Not applicable from 01.04.2011)
- Special provision for computing profits and gains of shipping business in the case of non-residents
- Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils
- Special provision for computing profits and gains of the business of operation of aircraft in the case of non-residents
- Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects… and so on
- Few deductions are available only in case of assessee if he is engaged in specified nature of business. The eligibility for these deduction shall be considered based on business coders entered by assessee. For example: Section 35ABA and 35ABB: Expenditure for obtaining right to use spectrum for telecommunication service and Expenditure for obtaining licence to operate telecommunication services. Relevant business code 12006
- Allowance for tea development account, coffee development account and rubber development account etc are available if along with other conditions correct relevant business codes are mentioned in ITR forms. 01001 etc
This is worth to mention here that one assessee might be engaged in two or more nature of business with single PAN, business registration and GST registration. Thus, allowance / benefit of more than one business codes under income might be available to single PAN holder and single premises registration.
Further, simply change in business code does not imply a change in nature of business or profession. However, it may be an indication of change in nature of business. Change in nature of business is a wide term and would imply a change in nature, timing and extent of doing business. Change in nature of business would have a direct impact on profitability of business but change in business code have impact on eligibility of an allowance.