Discontinued business
[Section-320 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 320(1) of Income Tax Act 2025
320(1) Irrespective of anything contained in section 4, where any business or profession is discontinued in any tax year, the income of the period beginning from the first day of that tax year up to the date of such discontinuance may, at the discretion of the Assessing Officer, be charged to tax in that tax year.
Section 320(2) of Income Tax Act 2025
320(2) The total income of each completed tax year or part of any tax year included in such period shall be chargeable to tax at the rate or rates in force in that tax year, and separate assessments shall be made in respect of each such completed tax year or part of any tax year.
Section 320(3) of Income Tax Act 2025
320(3) Any person discontinuing any business or profession shall give to the Assessing Officer notice of such discontinuance within fifteen days thereof.
Section 320(4) of Income Tax Act 2025
320(4) Where any business is discontinued in any year, any sum received after the discontinuance shall be deemed to be the income of the recipient and charged to tax accordingly in the year of receipt, if such sum would have been included in the total income of the person who carried on the business had such sum been received before such discontinuance.
Section 320(5) of Income Tax Act 2025
320(5) Where any profession is discontinued in any year on account of the cessation of the profession by, or the retirement or death of, the person carrying on the profession, any sum received after the discontinuance shall be deemed to be the income of the recipient and charged to tax accordingly in the year of receipt, if such sum would have been included in the total income of the said person, had it been received before such discontinuance.
Section 320(6) of Income Tax Act 2025
320(6) Where an assessment is to be made under the provisions of this section, the Assessing Officer may serve on the person whose income is to be assessed or, in the case of a firm, on any person who was a partner of such firm at the time of its discontinuance or, in the case of a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under section 268(1) and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under section 268.
Section 320(7) of Income Tax Act 2025
320(7) Irrespective of anything contained in section 268 or 280, where the provisions of sub-section (1) are applicable, the Assessing Officer may issue any notice under section 268 or 280, requiring the furnishing of the return by the person whose income is to be assessed in respect of any tax chargeable under any other provisions of this Act, within such period, not being less than seven days, as the Assessing Officer may think proper.
Section 320(8) of Income Tax Act 2025
320(8) The tax chargeable under this section shall be in addition to the tax, if any, chargeable under any other provision of this Act.
FAQs on Section 320 of Income Tax Act 2025
What happens when a business or profession is discontinued during a tax year under the Income Tax Act, 2025?
If a business or profession is discontinued during a tax year, the income from the beginning of the tax year to the date of discontinuance may be taxed in that same tax year at the discretion of the Assessing Officer, irrespective of section 4.
How is the income during the discontinued period taxed under Section 320(2)?
The income for each completed tax year or part of the tax year within the discontinued period is taxed at the rates in force for that year, and separate assessments are made for each such period.
Is the person discontinuing the business required to inform the tax authorities?
Yes, under Section 320(3), any person discontinuing a business or profession must notify the Assessing Officer within fifteen days of the discontinuance.
How is income received after discontinuance of a business treated for tax purposes?
According to Section 320(4), any income received after discontinuance is treated as income of the recipient and taxed in the year of receipt if it would have been taxable had it been received before discontinuance.
What if a profession is discontinued due to cessation, retirement, or death?
Under Section 320(5), if a profession is discontinued due to cessation, retirement, or death, any sum received afterward is deemed the income of the recipient and taxed in the year of receipt if it would have been part of total income had it been received earlier.
Can the Assessing Officer issue notices for assessment after discontinuance?
Yes, as per Section 320(6), the Assessing Officer may issue notices similar to those under Section 268 to the person whose income is to be assessed or, in the case of a firm or company, to a partner or principal officer, respectively.
Can the Assessing Officer require returns for other taxable income after discontinuance?
Yes, under Section 320(7), the Assessing Officer may issue notices under Section 268 or 280 requiring the furnishing of returns for other taxable income, with a minimum notice period of seven days.
Is the tax under Section 320 in addition to other tax liabilities under the Act?
Yes, according to Section 320(8), the tax charged under this section is in addition to any tax chargeable under other provisions of the Act.
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