why is income tax considered as a drawings?plz explain
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➡️➡️As mentioned in the answers already given, drawings are not deductible expenditure for Income-Tax purposes. I will try making it simpler.
Income-Tax is, as the name suggests, tax on “income”. That is, the Government wants a share of whatever money you make. It is least bothered about what you do with the income - spend, invest, save, whatever.
Think of a salaried person. He pays Income-Tax on the salary he receives. How he uses such money received by him is not, per se, a botheration for the purpose of Income-Tax.
For a proprietor, his income is the difference between the total revenue he made during the year reduced by the expenditures he made for the purpose of earning this income. We call such expenses, in common parlance, as business expenditure. These are spent for the sole purpose of business, or in other words, these expenses had to be made in order make the sales and hence the revenue.
Business expenses must be distinguished from personal expenses. The proprietor may draw money out of the business for his food, clothing, shelter, entertainment and what not. These are what are called as drawings. These are not related to the business and thus are not business expenses. These outflows will not be deductible from his income for calculating the Income-Tax payable by him.
Thus, his income, without any deduction of the drawings made by him, is what is subjected to tax. Therefore, the drawings money is getting taxed by being part of his income.
Hope this clarifies!
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_______________
Here is your answer..........
_______________________
➡️➡️As mentioned in the answers already given, drawings are not deductible expenditure for Income-Tax purposes. I will try making it simpler.
Income-Tax is, as the name suggests, tax on “income”. That is, the Government wants a share of whatever money you make. It is least bothered about what you do with the income - spend, invest, save, whatever.
Think of a salaried person. He pays Income-Tax on the salary he receives. How he uses such money received by him is not, per se, a botheration for the purpose of Income-Tax.
For a proprietor, his income is the difference between the total revenue he made during the year reduced by the expenditures he made for the purpose of earning this income. We call such expenses, in common parlance, as business expenditure. These are spent for the sole purpose of business, or in other words, these expenses had to be made in order make the sales and hence the revenue.
Business expenses must be distinguished from personal expenses. The proprietor may draw money out of the business for his food, clothing, shelter, entertainment and what not. These are what are called as drawings. These are not related to the business and thus are not business expenses. These outflows will not be deductible from his income for calculating the Income-Tax payable by him.
Thus, his income, without any deduction of the drawings made by him, is what is subjected to tax. Therefore, the drawings money is getting taxed by being part of his income.
Hope this clarifies!
________________
HOPE THIS HELPS YOU:)
PLEASE MARK ME AS BRAINLIST
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