Section 28 lists all incomes taxable under the head 'Profits and Gains of Business or Profession'. Students must memorise the eight categories because exam questions often turn on which head a receipt falls under.
## Incomes Charged under Section 28
(i) Profits or gains of any business or profession carried on by the assessee at any time during the previous year.
(ii) Any assistance, grant, or subsidy received from the Central or State Government in connection with business or profession (subject to certain exceptions, e.g., reduction from cost of asset).
(iii)Export incentives — including:
Cash Compensatory Support / Cash Assistance
Duty Drawback
Profit on sale of Import Entitlement Licenses / DEPB / DFRC etc.
(iv) Value of any gift, benefit, or perquisite arising from business or profession — whether received in cash or in kind (e.g., a doctor receiving a gift from a pharmaceutical company).
(v) Amount received (or receivable) for:
Not carrying out any activity in relation to any business or profession → commonly called Non-Compete Fees.
Not sharing any know-how, patent, copyright, trademark or similar intangible asset.
(vi) Amount (including bonus) received under a Keyman Insurance Policy (where the policy is on the life of a key person and the business pays the premium).
(vii)Fair Market Value (FMV) of stock-in-trade on the date of its conversion into a capital asset (in the year of conversion).
(viii)Interest, salary, bonus, commission or remuneration received by a partner from a firm/LLP — but only to the extent it has been allowed as deduction to the firm/LLP. Anything disallowed in the firm's hands is not taxable in the partner's hands.
Worked example
### Example 1
Question: Mr. P received the following in PY 2025-26:
(a) ₹5,00,000 as profit from his retail shop
(b) ₹50,000 duty drawback on exports
(c) ₹2,00,000 from a competitor for agreeing not to start a competing business for 3 years
(d) ₹3,00,000 as salary from his partnership firm (the firm claimed full deduction)
Solution: All four receipts are taxable under PGBP:
(a) Section 28(i) — Business profit
(b) Section 28(iii) — Export incentive
(c) Section 28(va) — Non-compete fees
(d) Section 28(v) — Partner's remuneration to the extent allowed to the firm.
Total PGBP = ₹10,50,000
⚠️ Common exam mistakes
Classifying gifts from suppliers/clients under 'Income from Other Sources' — they fall under Section 28(iv) PGBP if related to business.
Taxing the entire partner's remuneration in the partner's hands — only the amount actually allowed as deduction to the firm is taxable.
Treating subsidies as 'casual income' under IFOS — government subsidies linked to business are PGBP under Section 28(ii).
Confusing 'Non-compete fees' (Section 28 PGBP) with capital receipts — currently they are revenue, taxable under PGBP.
Bare-Act text Section 28 · Income-tax Act, 1961 · click to expand
Section 28: The following income shall be chargeable to income-tax under the head 'Profits and gains of business or profession' — (i) the profits and gains of any business or profession which was carried on by the assessee at any time during the previous year; (ii) any compensation or other payment due to or received by specified persons; (iiia–iiie) export incentives such as profits on sale of import entitlement licenses, cash assistance against exports, duty drawback, etc.; (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; (v) any interest, salary, bonus, commission or remuneration received by a partner of a firm from such firm to the extent allowed under section 40(b); (va) any sum received for not carrying out any activity in relation to any business/profession or for not sharing any know-how, patent, copyright, trademark, licence, franchise or any other business or commercial right of similar nature; (vi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus; (via) FMV of inventory as on the date of its conversion into a capital asset.