For six decades, Profits and Gains of Business or Profession (PGBP) was the most sprawling chapter in income tax law — a labyrinth of 17+ sections (Sections 28 to 44D), each with its own exceptions, provisos, and cross-references. Students and practitioners alike had to juggle Section 28 (basis of charge), Section 32 (depreciation), Section 37 (general deductions), Section 40(a) (TDS disallowances), and Section 43B (actual payment deductions) — all scattered across the statute with no logical flow.

The Income-tax Act, 2025 has performed a surgical restructuring of this entire head. PGBP now lives in Part D of Chapter IV (Sections 26 to 66) — a clean, sequential block of 41 sections covering everything from the basis of charge to presumptive taxation. For CA Final May 2027, this is the chapter that will separate prepared students from unprepared ones.

I. The Big Picture: What Changed in PGBP?

Before diving into individual sections, understand the philosophy behind the restructuring. The old Act had three fundamental problems in PGBP:

The ITA 2025 addresses all three. The new structure is sequential and logical — you compute income (Sec 26–27), apply allowable deductions (Sec 28–47), screen through disallowance filters (Sec 35–37), deal with special situations (Sec 38–65), and then check presumptive eligibility (Sec 58–60). Read it once in order, and it makes complete sense.

II. The Golden Mapping: ITA 1961 → ITA 2025 (PGBP Edition)

This is the most important table in this article. Memorise it, write it in your answer, and never mix up old and new section numbers in your May 2027 exam.

III. Section 33 — Depreciation: What Changed, What Stayed

Depreciation was old Section 32. It is now Section 33 of the ITA 2025. The underlying principles are largely preserved, but the drafting is sharper and a few sub-clauses have been refined based on ICAI's suggestions during the Bill stage.

What Section 33 Covers:

• Sub-section (1): Depreciation on tangible assets (buildings, machinery, plant, furniture) and intangible assets acquired on or after 1 April 1998 (know-how, patents, copyrights, trademarks, licences, franchises) — but NOT goodwill.
• Sub-section (2): For power-generation undertakings, depreciation is on actual cost (straight-line method) at prescribed rates.
• Sub-section (3): For all other assets — depreciation is on Written Down Value (WDV) of the block at prescribed rates.
• Sub-section (4): The 50% restriction applies if the asset is acquired AND put to use for less than 180 days in that Tax Year. (Note: The reference to sub-section (8) that was in the Bill was removed in the final Act as per ICAI's suggestion.)
• Sub-section (5): In cases of succession, amalgamation, or demerger — aggregate depreciation is capped and allocated on a pro-rata, day-count basis between the predecessor and successor.
• Sub-section (6): Capital expenditure on renovation/improvement of a leased building shall be treated as a building owned by the assessee for depreciation purposes.
• Sub-section (7): Depreciation under this section applies whether or not the assessee has claimed it — the AO can allow it automatically.

IV. The Deductions Architecture: Sections 28–37

In the old Act, "deductions" were an umbrella term for everything in Sections 30–37. The ITA 2025 breaks this into a cleaner architecture with specific sections for each category of expenditure.

V. The Disallowance Trio: Sections 35, 36 & 37

This is where the ITA 2025 has made the most impactful structural improvement. In the old Act, disallowances were a minefield — you had to know 40(a)(i), 40(a)(ia), 40(a)(ib), 40A(2), 40A(3), 40A(3A), and then separately, 43B(a) through 43B(h). The new Act separates these into three clean sections.

VI. Section 38 — Deemed Profits: The Recovery Provision

Old Section 41 dealt with "profits chargeable to tax" — situations where a deduction allowed in an earlier year gets reversed because a benefit is received. This is now Section 38 of the ITA 2025. The concept is unchanged: what was deducted must be taxed when recovered.

The key situations covered:

• Recovery of bad debts previously written off and allowed as deduction — taxable when recovered.
• Liability written back — any trading liability for which deduction was claimed but subsequently waived by the creditor is deemed profit.
• Balancing charge on depreciable assets — when a block of assets is sold and sale consideration exceeds the WDV, the excess is taxable here (read with Section 33).
• Insurance/salvage recovery on assets whose cost was fully deducted — amount recovered is deemed profit.

VII. Business Losses & Set-Off: Sections 108 & 112

The set-off and carry-forward rules for PGBP losses have moved out of Chapter IV and now sit in their own dedicated Chapter VII (Sections 108–121) of the ITA 2025. Here are the key provisions for CA Final May 2027:

Loss Type	ITA 2025 Section	Carry Forward Period	Set-Off Against
Business / Profession Loss (non-speculative)	Sec 112	8 Tax Years	Any business/profession income
Speculation Business Loss	Sec 113	4 Tax Years	Speculation income only
Specified Business Loss (Sec 46 business)	Sec 114	Indefinite	Specified business income only
Unabsorbed Depreciation	Sec 112(3) r/w Sec 33(11)	Indefinite	Any head of income (after business loss)

VIII. Section 58 — Presumptive Taxation: One Section, Multiple Schemes

In perhaps the most elegant simplification in PGBP, the ITA 2025 consolidates all presumptive taxation schemes into a single Section 58, presented as a master table. The old Act had separate sections for each scheme (44AD, 44ADA, 44AE, 44BB) — now they are all sub-entries within one provision.

IX. The Exam-Ready Computation Framework

For CA Final May 2027, a PGBP practical question (typically 8–14 marks) will test your ability to move through the ITA 2025 sequentially. Here is the exact flow the examiner expects:

X. Quick Revision — PGBP at a Glance