Assessable profit and taxable profit are two terms that are used in the financial sector. Assessable profit is a calculation done for finding an individual’s taxable income from the person’s gains and losses record. Taxable profit is the amount that is paid to the government, by an individual or an institution for the profit that they earn.
Table of Contents
Assessable Profit vs Taxable Profit
The main difference between Assessable profit and Taxable profit is that assessable profit is the profit that if obtained by an individual, he/she has to pay tax for it whereas taxable profit is the tax that has to be paid to the government by a person from their income.
Assessable profits as the name suggests are the profits for which taxes have to be paid as per law or the profits that which when obtained by an individual, he/she have to pay taxes to the government. The stakes of paying tax for assessable profits are decided by the government and it varies in different fields.
Taxable profit is the amount that an individual or an institution has to pay the government when a certain amount of income is obtained. A part of the income has to be paid as tax to the government for the smooth running of the government and the country.
Comparison Table Between Assessable Profit and Taxable Profit (in Tabular Form)
|Parameter of Comparison||Assessable Profit||Taxable Profit|
|Definition||Assessable profit is the profit amount for which tax is to be paid if earned by an individual.||Taxable profit is the amount that you have to pay to the government as tax.|
|Deductions||If you get tax credits from any source it may help you to reduce the amount of tax that has to be paid by reducing the assessable profit.||The deductions and credits are reduced from the assessable income. This makes your taxable profit amount lower.|
|Calculation||Assessable profit is the profit that is reported by the individual or an organization by explaining their source of income.||Taxable profit is the assessable income minus allowable deductions.|
|Payment||Assessable profit is calculated by the details given by the taxpayers and is determined as per the information given by them.||Taxable profit is similar for individuals and corporations below a cut-off and increases above it for corporations.|
|Example||In India, the assessable profit is the amount of profit earned from all the sources reported by the taxpayer which includes salary, investment gains, and income from any other source.||In India, the taxable profit is the difference between the assessable profit and the investment put on by the individual to earn this profit.|
What is Assessable Profit?
Assessable profit is the amount of profit for which tax has to be paid. The tax amount is decided by the government. It can be calculated from the income that is reported by the individual. When the government goes through the origin of income, some deductions are made if applicable. The applicability of tax deductions is also pre-determined by the government.
Assessable profit works differently for different taxpayers. If the taxpayer is a corporation, only certain parts of the profit are capable of being assessable and the rest is taken as profits. If the profit is calculated for individuals, passive incomes are the ones that are reasonable for assessable profits. Assessable profits can be reduced by the type of income reported.
If any income is reported from government-related plans, this part of the total income will not be added as assessable profit. These are also different for corporations when compared with individual taxpayers. Corporations may have more profits that are assessable when compared with individuals.
What is Taxable Profit?
Taxable profit is the amount that the government claims from the taxpayer for their income. This amount is identified from the income that is reported by the individual or corporation to the government. Some profits may not be included as taxable when the origin of profit is examined. These stakes are also maintained by the government.
At lower income levels the taxable profit of individuals and corporations is similar. But when the income rate increases, the amount to be paid by the corporations as the tax will increase. This can even be twice what is paid by individual taxpayers. All these rates are pre-determined by the government.
The Internal Revenue Service (IRS) is the bureau that files the tax system for a country. There is also a profit, that is termed as non-taxable. Many clarifications have to be cleared to term a profit as non-taxable. If the income is from an NGO or if the income is from the pensions that are allotted by the government, the profit cannot be taxable and hence a tax cannot be implemented for that income.
Main Differences Between Assessable Profit and Taxable Profit
- Assessable profits are the profits that are capable of paying taxes claimed by the government. Taxable profits are the profits which are to be paid to the government as tax.
- There can be profit reductions and tax credits and hence these can give reductions to the assessable profit. Taxable profit can get reduced by the tax credits and hence the amount of tax to be paid can be reduced.
- Some factors can be pre-determined by the government that can reduce the amount of profit that becomes assessable. These factors can change taxable profits to non-taxable profits.
- The amount of assessable profit is calculated from the assessable income. Taxable profit is the difference between assessable income and the deductions supported by the government.
- Assessable profit is determined from the information given by the taxpayers whereas taxable profits of individuals may differ from that of corporations.
The terms assessable profits and taxable profits are two factors that decide the tax of taxpayers in a country. Assessable profits are the ones for which an individual has to pay tax and taxable profit is the amount claimed by the government as tax from taxpayers.
Both of them can be altered by the schemes that are decided by the government and the taxpayers can get deductions in the amount that they have to pay. These rules and regulations get updated often and the IRS is to be followed by the taxpayers to update themselves with the information.
|AskAnyDifference Home||Click here|