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As per Section 29
The income referred to in section 28 shall be computed in accordance with the provisions contained in sections 30 to 43D
Section 145
Method of Accounting
Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall be computed in accordance with the method of accounting regularly employed by the assessee:
Assessee can either use
1. Cash System of Accounting
Incomes are recorded when received, expense are booked when paid
or
2. Mercantile System of Accounting
In this, income or expense are booked when due even though not yet paid
Treatment of Interest Income on Securites
It is taxable under Income from Other Sources.
if no method of accounting is specified by assessee, then it is taxable on due basis (Mercantile Basis)
Note:-
If accounts are correct but AO can't deduce income from the same because of method of accounting, then AO will determine the method to compute such Income
