Old Sections 28 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The "Profits and gains of business or profession" code of the 1961 Act — charge (28), depreciation (32), general deduction (37), TDS/cash disallowances (40, 40A), deemed profits (41), tax audit (44AB) and presumptive taxation (44AD/44ADA/44AE) — is carried into the Income-tax Act 2025 with thresholds and mechanics preserved.
Overview
Business and professional income is computed through a long chain of sections in the 1961 Act — the charge, the list of allowable expenses, the express disallowances, deemed profits and the presumptive schemes. The Income-tax Act 2025 consolidates these into a single business-and-profession head. The substance — what is taxable, what is deductible, and the safeguards against leakage — is retained.
What the Old Act Said
Section 28 charged profits of business/profession, including compensation, benefits and perquisites arising from business. Sections 30–37 allowed rent/repairs/insurance (30–31), depreciation on blocks of assets (32), specific deductions (35 for scientific research, 36 for interest, bad debts, contributions), and the residual "wholly and exclusively" deduction (37(1)). Sections 40, 40A and 43B disallowed expenditure — non-deduction of TDS (40(a)(i)/(ia)), excessive related-party payments (40A(2)), cash payments above ₹10,000 (40A(3)), and dues allowed only on actual payment (43B, including the MSME payment rule 43B(h)). Section 41 charged deemed profits on remission of liability or recovery of a written-off item. Section 44AB mandated tax audit above prescribed turnover; 44AD/44ADA/44AE offered presumptive taxation for small businesses, professionals and goods carriages.
What the New Act 2025 Changes
The 2025 Act re-sequences this code into a cleaner structure but preserves the computation. Block-of-assets depreciation continues on written-down value at prescribed rates. The residual "wholly and exclusively" deduction survives, with the same carve-outs (no deduction for offences/prohibited expenditure or CSR spend). The anti-avoidance disallowances (TDS default, ₹10,000 cash limit, related-party excess, 43B actual-payment including the MSME 45-day rule) are retained. Presumptive rates (8%/6% for eligible businesses; 50% for eligible professionals; the per-vehicle rate for goods carriages) and the raised turnover thresholds are carried forward, as are the tax-audit thresholds including the ₹10 crore limit where cash dealings stay within 5%.
Old → New Mapping
| Provision (1961 Act) | What it did | Position under Income-tax Act 2025 |
|---|---|---|
| Section 28 | Charge of business/professional income | Retained as the charging section of the head |
| Section 32 | Depreciation on block of assets (WDV) | Retained; block concept and prescribed rates preserved |
| Sections 35/36 | Scientific research; interest, bad debts, contributions | Carried forward as specific deductions |
| Section 37(1) | Residual "wholly and exclusively" deduction | Retained with offence/CSR carve-outs |
| Section 40 / 40A(2) / 40A(3) | TDS default, related-party excess, ₹10,000 cash disallowance | Retained as disallowance provisions |
| Section 43B (incl. 43B(h)) | Certain dues allowed on actual payment; MSME 45-day rule | Retained, including the MSME timely-payment condition |
| Section 41 | Deemed profits — remission/recovery | Retained |
| Section 44AB | Tax audit thresholds | Retained (₹1 crore/₹10 crore; ₹50 lakh professionals) |
| Section 44AD / 44ADA / 44AE | Presumptive taxation | Retained with rates and enhanced turnover limits |
Practical Impact / Examples
A trader with turnover ₹1.8 crore (all digital receipts) can still opt for presumptive taxation at 6%, declaring ₹10,80,000 profit and avoiding tax audit — unchanged under the 2025 Act, given the ₹3 crore presumptive threshold where cash receipts are within 5%. A professional (say a designer) with ₹60 lakh gross can declare 50% under the professional presumptive scheme (₹75 lakh threshold). A company paying ₹5,00,000 to an MSME supplier beyond 45 days will still see that expense disallowed in the year of accrual under the 43B(h)-equivalent rule and allowed only when paid.
Transition Tips
- Maintain the same books, fixed-asset register and TDS working papers — audit and disallowance tests are unchanged.
- If opting presumptive, confirm you stay within the turnover and cash-dealing limits before filing.
- Watch the MSME 45-day payment rule at year-end — pay before 31 March to avoid disallowance.
- Keep the ₹10,000 single-day cash payment limit in mind for every vendor payment.