Classified Profits

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Profits and Gains of Business or Profession – Income Tax

“Profit and gains of business or profession” is one of the heads of income under the Income Tax Act. For the purpose of ascertaining the tax liability of a taxpayer, the Income Tax Act divides the taxable income of an assessee into five categories or heads of income. Business profits is the third head of income under the Act, after salaries and house property income. This head is used to classify or aggregate income which the taxpayer generates through business or professional activities. While filing an income tax return, the taxpayer must declare the amount of profits and gains of business or profession in case the assessee is having any such income. In this article, we mention the procedure for calculating Profits and Gains of Business or Profession.

List of Incomes Classified under Profits and Gains of Business or Profession

The following incomes will be chargeable to income tax under the head “Profits and gains of business or profession”:

  1. Protis and gains of any business which was carried on by the assessee at any time during the financial year
  2. Any compensation or other payment due to or received by:
    • Any person in connection with termination/modification of an agreement for managing the whole or substantially the whole of affairs of an Indian company or any other company.
    • Any person holding an agency in India for any part of the activities relating to the business of any other person at or in connection with the termination or modification of the terms of the agency.
    • Any person for or in connection with the vesting in the Government, or in any corporation owned by or controlled by the Government, under any law for the time being imposed, of the management of any property or business.
  3. Income derived by trade, professional or similar association from specific services performed for its members. This is an exception to the general principle that a surplus arising to a mutual association cannot be regarded as income chargeable to tax.
  4. Export incentives which include:
    • Profits on sales of import licenses granted under Imports (Control) Order on account of exports.
    • Cash assistance, by whatever name called, received or receivable against export.
    • Duty drawbacks of Customs and Central Excise duties.
    • Any profit on the transfer of the Duty Entitlement Pass Book Scheme.
    • Any profit on the transfer of the Duty Free Replenishment Certificate.
  5. Value of any benefit or perquisite, whether convertible into money or not, arising during the course of the carrying on of any business or profession.
  6. Any interest, salary, bonus, commission or remuneration due to or received by a Partner of a Firm from the firm in which he is a partner.
  7. Any sum received or receivable in cash or in kind under an agreement for:
    • Not carrying out activity in relation to any business or profession.
    • Not sharing any know-how, patent, copyright, trademark, license, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or services.
  8. Any sum received under a Keyman Insurance Policy including the sum allocated by way of bonus on such policy.
  9. Any sum whether received or receivable, in cash or kind, on account of any capital asset being demolished, destroyed, discarded or transferred, if the whole of the expenditure on such capital asset has been allowed as a deduction under Section 35AD.

Classifying Income Under Profits and Gains of Business or Profession

In case the taxpayer is not able to find a type of income under the list above, the following conditions can be used to verify if an income would fall under Profits and gains of business or profession. According to Section 28, the following are the main clause that requires an income to be charged under profits and gains of business or profession:

  1. There should be a business or profession.
  2. The business or profession should have been carried on by the assessee.
  3. The business or profession should be carried on for some time during the financial year.
  4. The charge is in respect of the profits and gains of the financial year of the business or profession.
  5. The charge extends to any business or profession carried on by the assessee whether under the taxpayer’s own name or otherwise.

Under Section 28, one of the main aspects on determining if an income must be classified under profits and gains of business or profession is that if a business was carried on by the assessee at any time during the financial year. It is, however, not necessary that the business is carried out throughout the financial year or till the end of the financial year.

Other Income Classified as Profits and Gains of Business

There are certain exceptions to the above rules. The following incomes must be classified under Profits and Gains of Business, even if a business was not carried on by the assessee during the previous year.

  • Recovery against any loss, expenditure or trading liability earlier allowed as a deduction.
  • Balancing charge in case of electricity companies.
  • Sale of a capital asset which was used for scientific research.
  • Recovery against bad debts.
  • Any amount which is withdrawn from a Special Reserve.
  • Receipt of discontinued business in the case of assessees who are making use of a cash system of accounting.

To know about the concept of Tax Audit Turnover in Income Tax, click here.

Best Features to Launch Classified Ads Platform – Business Insights Included

Classified sites have a bright future as more and more people are using internet to search for products and services locally. This made business analysts at FATbit Technologies study the business model, site features, and revenue model of popular classified ads platforms.

During our research, we discovered that following features can help entrepreneurs launch advanced classified ads portal. But before proceeding to features, let’s first understand the business model and revenue generation method of classified ad platforms.

Business Model

Classified ad platforms help people list products and services for sale as well as purchase. Here are some major highlights of classified ad platform business model:

  • Anyone can list a product/service for sale.
  • Creating a listing is absolutely free.
  • Paid options to enhance your listing.
  • Buyers can see product pictures and other details without registering.
  • Buyer can directly get in touch with the seller.

How such platforms make money?

The most common way of profit generation is the membership subscription where users can post multiple ads based on a monthly fee. Driven by a simple business model of connecting buyers and sellers, a classified website offer great scope to make money. Let’s understand the 3 revenue generation streams. Add these monetization options into your classified ad clone to make big profits:

1. Google Ads

Such platforms put Google ads on their website to generate income. The ads are placed on homepage as well as product pages. Each new product added to the website gets a new page. This means more products, more pages and hence greater revenue from Google AdSense.

2. Paid Options for Classified Ads

Apart from Google ads, classified ad portals offer some paid ad options as well. User can choose the paid services at the time of posting the advertisement. These paid services are basically used to enhance the visibility of the ad on the site. There are multiple package options to choose from, and the payment is securely handled by that particular website. Every classified ads website should have this feature.

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3. For Business

This is meant for advertisers who want to buy advertising space on the website. Here advertisers can select a space to display their ads according to the available packages and can upload the banner on their own.

This feature can be integrated in your classified site at a later stage. Now, let’s get acquainted with the biggest names in online classifieds industry.

Industry leaders

Classified sites are rarely global. They mostly cater to a particular country or geographical area. We are sharing the most popular names in classifieds industry:

Because of the ‘local’ nature of such sites, it would be best to target a location that doesn’t presently has one.

Let’s move on to study the features and functionality of classified ad portal, starting with homepage.

Major Homepage Features

The homepage must be designed beautifully. The first fold can include an aptly planned banner that carries website’s central message, and major classified categories. These categories can include:

The latest products should be displayed on the homepage along with filter options. Let’s go through the most impressive homepage aspects and understand some sections one by one:

1. Display of Latest Ads in Different Sections

Latest ads can be listed in different sections with the functionality to change the category. This will help the user in quickly discovering ads most relevant to him.

2. Premium Ads

Make way for premium ads on the homepage. This will help generate a recurring stream of income. Add such a section of premium ads on your classified site’s homepage to make additional dollars without ruining the user experience.

Create Account

Place the Register/Login links on top and make the provision to open them with a pop-up. This will make it prominent and help increase the number of sign-ups. Keep the sign up process explicit with fields like:

  • Name
  • Email ID
  • Password
  • Confirm Password
  • Phone Number


Just like registration feature, a special pop up can be dedicated for login purpose with fields like:

There should be an option to login with social media accounts also. This will further simplify the process of joining the site.

Features for Sellers

Everyone should be able to create an account and post an ad for free on the website. Let’s see what features can make your platform unique and one of the most popular classified ads sites across the world.

1. Post an Ad

Like any other classified ads website, yours also needs a form to list their products. Below are the main highlights of this feature:

  • Every ad requires a title.
  • Images to be uploaded.
  • YouTube videos can be added.
  • A long description.
  • Special price section.
  • Paid option to make an ad stand out.
  • Contact info (email and phone number) with contact person’s name.

The ‘post an ad’ form should be well-designed and easy to use. If building on a classified ad clone script, make sure it brings an intuitive ‘post an ad’ feature.

2. Phone Verification

All ads posted on the website must undergo an account verification. This can be done through a code which sent to seller’s mobile number. This feature helps fight spam to a great extent.

3. Manage Ad Tools/ User Profile

Once a seller has listed a product on the website, he should be provided a dashboard to manage the posted ads. Highlights of this ad management feature are:

  • Posted ad can be edited, deleted or promoted.
  • Sellers can see the number of views received on their ads.
  • Detailed statistics including views, listing views, email replies & time bumped.

Features for Buyers

It is very essential to attract a huge number of visitors on your classifieds website. Let’s see what features will make your classified ad portal appealing to buyers.

1. Search Feature

The search feature is the backbone of every classified ads website. Professionals from FATbit Technologies studied the search feature of leading classified ad platforms and came to the conclusions that yours should include:

  • Instant suggestions
  • Category suggestions along with keyword suggestions.
  • Option to search a product in a particular category.
  • Location filter as part of the search bar.
  • Filter options to refine the search results.

2. Favorites & Saved Searches

Favorites and saved searches help users to review the ads they have liked and saved, eliminating the need of searching through thousands of listings again. So, there should be the feature to save classified listings to wish list. All the listings marked as favorite should appear in the “Favorites” section which can be added in the top navigation. Make sure that your chosen classified ad clone script has this feature because popular names like Gumtree have it.

3. Map Integration on Ad Page

Map integration lets a buyer know the location of seller. The location should be marked automatically based on the area filled by the buyer while listing the product. This is yet another highly recommended feature for your classified ad clone.

4. Report a Classified Ad

Classified ad websites must take stringent measures to fight spam. Add a special “Report” form on each page which should allow users to report irrelevant or misleading ads. Some websites also have dedicated teams to find and remove spammy content from sites. So, in addition to ‘mark as spam’, you can also take manual action.

Help Section

Create a vast help and support section. Help section can include all the important queries that a user can face while using your platform or while posting a particular ad. If you are planning to start your own classified ad clone, then you should have a vast FAQ section to begin with and also a dedicated support team when user base increases.

Website Blog

The site must have a special blog where the company can share tips for sellers & buyers on vast range of topics. Along with informative posts on how to be safe and make the maximum of this classified ads portal, use your blog to share major company happenings.

In short, make sure that your classified ad clone script has an inbuilt blog.

The final call

Classified portals like OLX, iLister and Craigslist are the most popular classified ads website in the world, and have the most advanced features. If you have ever thought of launching a classified website, then, this is the right time to take action. However, make sure you hire an experienced team of designers and developers for your classified site. Else it will have a difficult time competing with popular ad listing platforms.

Disclaimer: The Blog has been created with consideration and care. We strive to ensure that all information is as complete, correct, comprehensible, accurate and up-to-date as possible. Despite our continuing efforts, we cannot guarantee that the information made available is complete, correct, accurate or up-to-date. We advise – the readers should not take decisions completely based on the information and views shared by FATbit on its blog, readers should do their own research to further assure themselves before taking any commercial decision. The 3rd party trademarks, logos and screenshots of the websites and mobile applications are property of their respective owners, we are not directly associated with most of them.

About: FATbit Chef

FATbit Chef is the official broadcaster of everything that happens inside FATbit. Count on the invisible reporter for detailed analysis based posts, new service additions, and other brand related updates.

Classified Profits

The final financial result of activity of the enterprise is the amount of profit (or loss), which is calculated based on the amount of income and current costs associated with obtaining it. Category profit occurs at the level of a business entity – a legal entity. The financial result of the activities of an individual who does not perform business functions (employee, Bank depositor, shareholder, etc) is the amount of income that may consist of wages, interest on invested capital, rental payments for the use of their own resources. To determine the final financial result of activity of a legal entity it is necessary to calculate exactly the amount of profit, as the company, by performing economic activities, expends certain funds (carries out current costs) associated with generating income. In the case where the income exceeds the amount of such costs, the company has the desired expected financial result from the activity, which is measured by the amount of profits.

– strategic goal of the enterprise. At different stages of development of the enterprise and its managers have specific local goals, such as retention of the low-level of prices (and therefore profits) for the products with the aim of capturing a segment of the market. However, it is the expectation of profit is the driving force of the economy;

– the final financial result of activity of the enterprise. Profit is the main motive of entrepreneurs, the criterion of efficiency of work of the enterprise. The more profit in the amount of invested capital it receives, the more effectively works;

– the main element of financial resources of the enterprise. Profits should be used as a source of expanded reproduction resource potential of the enterprise. However, in the context of inflation expectations, inefficient depreciation policy of the state, he can concentrate on the implementation of simple reproduction;

– the source of creation of wealth of the owners of the company in the form of cash dividend payments and maximize the market value of the company (through the capitalization of profits);

one of the sources of Finance revenue of the state budget. Since profit is part of income that is taxed, his value depends on the amount of state revenues in the form of income tax (about 16% of the revenue of the State budget of Ukraine total revenues from this tax) (table. 10.1).

Profit performs the following functions: signal, junction and stimulating.

Similarly, the interpretation of the term “income” distinguish between economic profit and accounting profit for tax purposes.

From an economic point of view, the profit is the difference between income from operations and related income economic costs.

Table 10.1. The financial result from ordinary activities before taxation of economic activity in Ukraine in 2001-2005








Agriculture, hunting and forestry

Wholesale and retail trade, trade of vehicles, repair services

Transport and communications

Of estate, letting and services to legal entities

Collective, public and personal services

In the modern economy the profit of the company has various forms and is implemented in a complex institutional environment. For example, the profit is small private enterprise is the profit of a business entity, the owner of which has devoted his life to the business, and invested personal capital and labor. Economic profit of an enterprise is determined as the difference between the amount of income received and the sum of economic costs (external and internal). Methods of formation of economic profit of an enterprise is represented in Fig. 10.2.

Fig. 10.2. The scheme of formation of profit of private enterprise

External (explicit) costs – cash payments made by the owner from its own funds to the suppliers of raw materials, fuel, wages and the like. They are available for provider resources, which is not a business owner. However, the entrepreneur can use specific resources that belong to him personally. Internal (implicit) costs – the costs associated with the use of own resources of the entrepreneur (capital money, property, effort, entrepreneur, etc.). The magnitude of the internal cost describes the price of the appropriateness of services of the entrepreneur and should be equal to cash payments that could be obtained in alternative ways using its own resources. Normal profit is the minimum payment required to retain entrepreneurial talent within the enterprise. The boundary between economic profit and internal costs is based on benefits offered by the entrepreneur to preserve their economic independence. In the case where the amount of economic income is equal to economic costs, some business provides a minimum reward of the entrepreneur for the use of its own resources and entrepreneurial talent. Provided excess of revenue over economic cost of a certain business provides economic profit and is attractive to the entrepreneur. In the case where income is less than the magnitude of the economic costs (the entrepreneur receives no economic profit), it perjorative their efforts with a particular activity to another, more attractive, or refuse the role of entrepreneur for the sake of receiving wages, working employee, and receiving rent payments for the provision of its resources for temporary use.

Economic profit performs the adjusting function. The market system directs resources to those industries, for products where there is a high enough consumer demand to production of these products could be profitable. If all enterprises were owned by the time to jump into a thriving industry and out of the problem, the volume of production of each industry would be so large that it would obtain a normal profit.

Considering profit as an economic category, we talk about it in the abstract. In Fig. 10.3 shows the formation of economic profit at a small private enterprise. Profit, for example, a large joint-stock enterprise is the profit, far from its shareholders, to disclose its nature very difficult. He loses his personified. Shareholders as legal owners of the enterprise separated from business activities. They invest capital and receive dividends, whose nature is closer to the capital interest than to economic profit. Managers who directly control the enterprise, is in fact, his economic masters. The effectiveness of their efforts depends the future of the enterprise and the amount of the profit. The profit of a large enterprise is a profit institution, which is separated from its shareholders and not individuals. Under these conditions, he serves as the account value.

The profit figure, which is declared in the financial statements of the company should provide shareholders who do not take actual participation in economic activities, reliable information on the financial results of his work. With this purpose in planning and evaluating the effectiveness of economic and financial activity of the enterprise is used calculated with the use of special procedures accounting profit.

According to accounting profit (accounting) is the amount by which the income defined by the rules of accounting, exceed the associated costs. Loss – the excess of expenditure over income for the receipt of which had made these costs.

In the calculation of accounting profits use categories of accounting income and accounting of current expenses, which are based on the application of the principle of accrual and matching of revenues and expenses. That is, under the income, for example, when the goods in the case of cost of production, the ownership of which is transferred to the buyer, regardless of when you received it. Current cost is the value used for the manufacture of products resources, regardless of when they are paid for.

Therefore, in the calculation of accounting profits, one should distinguish between the accounting income and expenses, on the one hand, and real cash flows – income and expenditure on the other. Significant amounts of accounting profit of the enterprise still did not indicate the flow of real money into his account. What is the value of accounting profit does not always give a reliable picture of the activities of the enterprise. Persons who become acquainted with the report on financial results can sometimes be misled by the amount of the profit. So, the shareholders can expect dividend payments when the company declares a significant profit. However, if it is not the masses of real cash to pay the dividend expectations of shareholders are not justified.

Regulations (standards) of accounting in different countries serves, as a rule, their own (peculiar to this country) the interpretation of economic categories. Therefore, analyzing the activities of enterprises in the country and in particular in Ukraine, you need to see the national interpretation. The income that is declared by the enterprise operating in the United States, if calculated according to the rules adopted in France or another country may have a different meaning. For example, the German firm “Hoechst” published two whined statements: one in accordance with the principles of” KMSO(international standards), and the second in accordance with the principles of the United States (generally accepted accounting principles in the United States). According to the norms of KMSO, in 1995 received $ 1.2 billion. income, and in 1996 1.1 billion dollars. For a more rigorous principles of the United States in 1905. the firm suffered losses of $ 40 million. and in 1996 – 708 mill. $ .1

By analogy with the classification of the income of the company in the preparation of the financial statements is classified and profit (Fig. 10.3).

Fig. 10.3. Prisutno classification based on types of activity of the enterprise, according to the financial statements

Operating profit – the amount by which revenues from operating activities (income from sales + other operating income) exceeds the sum of the current costs associated with this activity (cost of sales + administrative costs + distribution costs + + other operating expenses).

Gross profit is the amount by which the net income from the sale of products exceeds current production costs of goods sold (cost). Comparison of gross profit with the amount of profit as a final financial result of activity of the enterprise allows to get an idea of the proportion of indirect costs associated with the management of the enterprise, the financing General working capital needs and sales. The level of gross profit to draw conclusions about the effectiveness of the enterprise. However, for pricing purposes, i.e. for the formation of prices on specific types of products, it is necessary to consider the administrative and sales expenses, distributing them between certain types of products. The profit from the sale of a specific product must be determined as the difference between the net income from sales and the total amount of current expenses associated with the production and sale of products (Fig. 10.4).

Fig. 10.4. Methodological basis of determining profit from the sale of products

Net income from sales of products is determined by reducing the amount of income from sales in the amount of taxes and fees, which is included in the income from sales of products (value-added tax, excise tax), as well as providing consumers with discounts and other amounts that need to be excluded from income.

Gains from the sale of products is influenced by such factors:

1) increase volume of production and sales;

2) structural shifts in the product mix;

3) reduce production costs;

4) increasing product prices.

The main document financial statements of the company, from which you can obtain information about the amount of profit and its functional composition is the statement of financial performance.

Based on the data of the enterprise for the month of February 2004, are given in table. 10.2, calculate:

3) financial result (profit or loss) from operating activities;

4) financial result (profit or loss) from ordinary activities before taxation;

5) financial result (profit or loss) from ordinary activities after tax;

6) net profit or loss of the company.

Table 10.2. Report on the financial results of the company for the first quarter of 2006, th

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