In this article, we’ll break down who exactly falls under Profits and Gains of Business or Profession, also called PGBP, in super chill language-just how I’d explain it to a friend over coffee (or tea, if you’re a chai person like me).
What is PGBP? A Quick Reality Check
PGBP stands for Profits and Gains of Business or Profession. Simple, right? It basically covers income earned through:
- Business activities
- Professional services
- Speculative trades
- Freelancing, consultancy, agency work, etc.
If you earn money by doing something, not just by owning something, then chances are… hello, PGBP
Who is Covered Under PGBP?
Now let’s break down the actual people and entities covered under this head. If you fall into any of the following categories, congrats – the Income Tax Act is watching you (in a totally legal way).
1.Business Owners
Think shopkeepers, manufacturers, online sellers, dropshipping hustlers, and even that guy selling homemade chocolate on Instagram. All of these earn business income.
- Retailers and wholesalers
- Traders – both online and offline
- Transport companies
- E-commerce sellers (Amazon, Flipkart, Etsy, etc.)
- Even someone running a cloud kitchen from home
Bold truth: If you’re selling goods or services with the intention of earning a profit, you are under PGBP.
2. Professionals
Here’s where we talk about the profession under income tax side of things.
According to the law, a profession is a vocation where specialized knowledge, expertise, or skills are used. So it covers:
- Chartered Accountants
- Doctors
- Lawyers
- Architects
- Engineers
- Freelance designers, content writers, digital marketers (yup, no escape)
- Technical consultants, IT freelancers, trainers, etc.
Understanding Profession under Income Tax: Definition, Examples, and Key Differences from Business becomes more important here: a profession is usually service-based, personal, and skill-driven. A business can run without the owner’s personal involvement. But a profession? It’s personal AF.
Income Not Always Equal to Profit
Ever wondered why everyone talks about profits and not just income? Because expenses matter. Under PGBP, you’re taxed on NET profit after deducting business expenses.
Here’s what you can deduct:
- Rent of your office/shop
- Salary to employees
- Internet and telephone bills
- Travel expenses for work
- Software subscriptions
- Utility bills
Can you deduct the Netflix subscription you “use for research”? Umm… nice try 🙂
Difference Between Business and Profession
Let’s iron this out because people confuse these terms all the time.
| Feature | Business | Profession |
| Nature | Trade/commercial | Service/personal skill |
| Capital | Can be heavy | Usually less |
| Personal Skill | Not essential | Mandatory |
| Regulatory Body | Not always | Often regulated (like ICAI, MCI, Bar Council) |
IMO, the simplest way to tell the difference: If your business can run even when you’re on vacation, it’s business. If everything stops when you stop, it’s a profession.
Speculative Income Also Covered
This one surprises a lot of people. Income from speculative transactions like day-trading in shares or derivatives (where no actual delivery happens) is ALSO taxed under PGBP.
So if you’re doing intraday trading and calling it a “hobby” – LOL, the Income Tax department disagrees.
Presumptive Taxation Schemes
Alright, here’s the part that some taxpayers actually like.
Under sections 44AD, 44ADA, and 44AE, small businesses and professionals can declare income on a presumptive basis-basically, just assume profit as a percentage of turnover and be done with it. No books, no headache.
- 44AD – Small business (turnover up to Rs. 2 crores, with a higher limit of Rs. 3 crores, Conditions Apply)
- 44ADA – Professionals (income up to ₹75 lakh)
- 44AE – Transport business (heavy goods vehicles, Conditions Apply)
Why go through every receipt when you can simply declare 8% or 6% profit, or 50% under Section 44ADA? It sounds convenient, right? And it’s completely legal.
Examples in Real Life
Let’s make this super practical.
Example 1:
Ravi owns a stationery store. He buys notebooks for ₹50, sells for ₹70. This margin minus expenses is his PGBP income.
Example 2:
Dr. Kavita runs her clinic. She charges consultation fees, pays nurse salaries, clinic rent, etc. Her net earnings = PGBP.
Example 3:
Sneha works from home as a freelance graphic designer on Fiverr and Upwork. Her earnings from clients? Yep-PGBP.
See the pattern? If money comes because YOU did something, and not because your money or property did something (that’s interest or rent), you’re under this head.
Things Commonly Included in PGBP
Here’s a bullet list to keep it clean and visual:
- Income from trade and commerce
- Professional earnings
- Interest on business bank deposits
- Profit on sale of business assets
- Income from speculative businesses
- Bad debts recovered
- Compensation received due to business contracts
Expenses Allowed Under PGBP
Important because nobody likes paying tax on gross income:
- Rent and electricity bills
- Salaries, commission, bonus
- Interest on business loans
- Repairs and maintenance
- Depreciation on assets
- Fuel, travel, and conveyance
- Advertisement expenses
- Software, subscription, domain hosting, website fees
Basically, spend money for business, and the Act usually allows it.
What is Not Allowed?
Don’t push your luck. Some expenses are totally disallowed.
- Personal expenses (your Netflix, vacation, gym membership… sorry!)
- Penalties for breaking law (like traffic fines)
- Capital expenditure (though you can claim depreciation, not the entire cost)
- Income tax paid itself
- Drawings or personal withdrawals
So yeah, you can’t claim your Goa weekend trip as “business research” unless you’re, I dunno, a travel blogger maybe?
Reporting PGBP Income in ITR
When you file your Income Tax Return, which form do you use? Depends on whether you are a business or professional and your turnover.
- ITR-3 – For individuals/HUF with income from business/profession
- ITR-4 – For presumptive taxpayers (under 44AD, 44ADA, etc.)
Miss this step, and the tax department might come knocking. And trust me, that’s not fun 🙂
Why This Category Matters for Taxes
The government wants people who earn through business or profession to contribute tax just like salaried folks. But since there’s no employer deducting TDS every month, PGBP taxpayers must calculate their own advance tax, keep books, or opt for presumptive schemes.
Honestly, if you plan it well, PGBP can be super tax-efficient. Business owners can legally claim so many deductions that the final taxable income becomes much lower than it sounds.
Conclusion – The Big Takeaway
So… now we know. PGBP isn’t some boring acronym you can skip House Property while filing taxes. It’s one of the most powerful and flexible heads of income in the Indian tax system. It covers everyone from shop owners to surgeons, bloggers to bakers, coders to CA firms.
Whether you run a million-dollar company or just earn a side income on weekends, if it’s not salary, rent, capital gains, or lottery – it’s probably PGBP.
And best part? You can claim legit expenses and reduce tax. Just stay on the right side of the law.
Ever felt left out of the “business owner” category? Don’t worry. Under the eyes of the Income Tax Department, we’re all entrepreneurs in some form. Funny, right?
Alright, that’s enough tax talk for the day.
Take a break, grab a coffee, and hey – maybe even feel slightly smarter knowing what PGBP really is.
Author Bio
💡 If you need expert assistance with GST registration, filing, or compliance, you can connect with ftaxco.in
for professional support.