If I have some income receivable in the next financial year then should I include it in gross income and then deduct business income and then report the next or should the account receivables not be considered?
Generally trading account receivables come in picture when you sell the goods or services to customers on credit basis. And hence, sales are also be credited in that particular year when you actually sell the goods or services, (Considering accrual based accounting).
If your maintaining books based on accrual system then, there is no need to pay taxes on accounts receivable as it is considered as current assets. Because, the taxes were already been paid in that year when you actually did credit sale transaction with customer.
Hence, it should not be included in GTI and so account receivables not to be considered.
@Kaushal_Soni ok so only transactions that are settled are considered as business income.
Is it the same for expenses as well? Like if we buy goods or services in this financial year with some upfront payment but pay the remaining amount in the next FY, then only the amount spent can be deducted as an expense for income tax, correct?
For income tax purpose, every expenses incurred during the year can be taken for deduction irrespective of whether amount is being paid in current FY or in upcoming financial years, provided tax payer is in business or profession.
This is the basis of mercantile accounting system and accordingly eligible expenses accounted for during the particular financial year should be taken for income tax computation expenses.
Hope, it helps!