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Income Under the 5 Heads


                Sudhir Yadav
Income From Five Heads are as Follows
1. Income from salary
2. Income from house property
3. Income from profit or gain from business or
   profession.
4. Income from capital gain.
5. Income from other sources.
Complete Process of Computation of Taxable Income
                      & Tax
1) Determine the residential status of the assesse
2) Determine the incidence of tax
3) Classify income after considering specific
   exemption into respective head.
4) Aggregate the income.
5) Apply clubing Provision.
6) Setoff/Carry forward losses (if any)
7) Balance shall be gross total income.
Cont
8. Allow deduction 80C to 80U chpt VI A.
9. Balance shall be total income.
10. Determine the tax payable, applying the rates applicable.
11. Deduct rebate/relief of tax.
12. Add surcharge.
13. Add educational cess.
14. Balance is tax payable.
15. File return of income before the due date of filing.
Income From Salary
Salaries U/S 17(1) include following:-
1. Wages
2. Pension
3. Gratuity
4. Any fees, Commission, Perquisite,Profit in
   lieu of salary
5. Any advance salary etc
List of Allowance exempted from tax
1. Conveyance allowance .
2. Children education allowance .
3. Any allowance granted to an employee to meet the hostel
    expenditure of his child .
4. Transport allowance .
5. House rent allowance .
6. Provident Fund .
7. Gratuity .
8. Leave travel concession .
9. Compensation received at the time of voluntary
    retirement .
10. Encashment of earned leave at the time of retirement .
11. Computation of pension .
12. Entertainment allowance .
Statement of total income from salary
          Particular                      Rs    Rs
          Basic salary                          XXX
          Dearness Allowances (DA)              XXX
          House Rent Allowances           xxx
Less :-   Exemptions Under sec10 (13 A)   xxx   XXX
          Eduacation Allowances           XXX
Less :-   Exemptions Under sec10 (14)     xxx   XXX
          Conveyance Allowance            xxx
Less :-   Exemption Under sec 10(14)      xxx   XXX
          Bonus                                 XXX
          Gratuity                        xxx
Less:-    Exemption Under sec 10(10)      xxx   XXX
          Perquisities (Taxable)                XXX
          Entertainment Allowances              XXX
          Gross Salary                          XXX
Less :-   Deductions
          U/S 16                          xxx
          U/S 16(2)                       xxx
          U/S 16(3)                       xxx   XXX
          Taxable Income from Salary            XXX
INCOME FROM HOUSE PROPERTY

Sec 22 of Income Tax Act 1961
Income from houses, buildings, bungalows
Tax is based on Annual value.
POINTS TO BE REMEMBERED

Assessee should be the Owner of the Property
Should be not be used for Own Business or
 Profession
In Case of Dispute Regarding Title
Property Let Out along with other Assets
In case of sub-Letting
ANNUAL VALUE                         (SEC 23)


EXPECTED RENT
Municipal Rent Value (MRV)                      XXX
Fair Rental Value (FRV)                         XXX
Whichever is higher (ER)                        X X X ( If no SR)
Standard Rent (SR) ( If available)              XXX
Whichever is less (ER)                          XXX


FAIR RENT
The rent which a similar property will fetch at
 the same or nearby similar locality.
MUNICIPAL RENT
The value fixed by the municipal or local
 authority

STANDARD RENT
Rent fixed by the Rent Control Act
Max rent an owner can claim from his tenant as
  rent

ACTUAL RENT
Rent for which property has been let out
CALCULATION OF GAV

                Particular   House 1    House 2

MRV                          1,05,000   1,05,000

FRV                          1,07,000   1,07,000

Whichever is higher          1,07,000   1,07,000

SR                           1,35,000   1,35,000

ER (Whichever is Less)       1,07,000   1,07,000


AR                           1,12,000   98,000

GAV                          1,12,000   1,07,000
COMPUTION OF HOUSE PROPERTY
INCOME
                 Particulars                 amount   amount

  Gross Annual Value                                   xxx
  Less: Municipal tax -Paid by owner                   xxx

              Net Annual Value                         xxx

  Deduction U/S 24

  1. Standard deduction -30% of NAV           xxx
  2. Int. on borrowed capital- Paid or due    xxx
                                                       xxx

  Income from House Property                           xxx
Income from Profit/Gain from
          Business/Profession
Chargeability Under sec 28
1. Profit/Gain from any business/Profession
2. Profit on sale of import entitlement license
3. Duty drawback
4. Value of benefit arising from any business/profession
5. Income derived by trade/profession
6. Income from speculative transaction
7. Income received under keyman insurance policy
8. Any interest,salary, Bonus, commision or
   remuneration received by partner of a firm.
Case business income is not taxable
                u/s 28
• Rental business
• Dividend on share
• Speculative transactions
  excluded :-Hedging contracts and derivative
  transaction.
How to compute PGBP

U/S 30 Deductions allowed
Rent taken
Repairs not in a nature of capex
Insurance premium
U/S 31 Deductions allowed w.r.t plant & machinery.
Sec 32 Depreciation
Income from Capital Gain
Chargeability U/S 45 (1)
Capital Gain tax liability arises when following
  conditions get satisfied:-
• There should be a Capital Asset
• There should be a Transfer
• Transfer should be in previous year
• Result of transfer should be profit or gain
• Such Profit/Gain is not exempt.
Exemption for Capital Assets
• Any Stock-in-Trade.
• Movable Property (excludes jewellery
  archeological, Drawings, Paintings, Sculpture).
• Agricultural Rural Land.
• 65% Gold Bond -1977 / 7% Gold Bonds-1980/
  National Defense Gold Bond issued by Central
  Government.
• Special Bearer Bonds 1991.
• Gold Deposit Bond issued under Gold deposit
  scheme 1999.
Types of Capital Assets
There are two types of Capital Assets
I. Short Term Capital Asset
II. Long Term Capital Asset
Income from Other Sources
Chargeability U/S 56(2)
It includes the following
• Dividend.
• Windfall from lotteries crossword gambling.
• Income by way of interest on securities.
• Income from Royalty
• Director fees
• Income from investment
Thank You!!! 

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Income under the 5 heads

  • 1. Income Under the 5 Heads Sudhir Yadav
  • 2. Income From Five Heads are as Follows 1. Income from salary 2. Income from house property 3. Income from profit or gain from business or profession. 4. Income from capital gain. 5. Income from other sources.
  • 3. Complete Process of Computation of Taxable Income & Tax 1) Determine the residential status of the assesse 2) Determine the incidence of tax 3) Classify income after considering specific exemption into respective head. 4) Aggregate the income. 5) Apply clubing Provision. 6) Setoff/Carry forward losses (if any) 7) Balance shall be gross total income.
  • 4. Cont 8. Allow deduction 80C to 80U chpt VI A. 9. Balance shall be total income. 10. Determine the tax payable, applying the rates applicable. 11. Deduct rebate/relief of tax. 12. Add surcharge. 13. Add educational cess. 14. Balance is tax payable. 15. File return of income before the due date of filing.
  • 5. Income From Salary Salaries U/S 17(1) include following:- 1. Wages 2. Pension 3. Gratuity 4. Any fees, Commission, Perquisite,Profit in lieu of salary 5. Any advance salary etc
  • 6. List of Allowance exempted from tax 1. Conveyance allowance . 2. Children education allowance . 3. Any allowance granted to an employee to meet the hostel expenditure of his child . 4. Transport allowance . 5. House rent allowance . 6. Provident Fund . 7. Gratuity . 8. Leave travel concession . 9. Compensation received at the time of voluntary retirement . 10. Encashment of earned leave at the time of retirement . 11. Computation of pension . 12. Entertainment allowance .
  • 7. Statement of total income from salary Particular Rs Rs Basic salary XXX Dearness Allowances (DA) XXX House Rent Allowances xxx Less :- Exemptions Under sec10 (13 A) xxx XXX Eduacation Allowances XXX Less :- Exemptions Under sec10 (14) xxx XXX Conveyance Allowance xxx Less :- Exemption Under sec 10(14) xxx XXX Bonus XXX Gratuity xxx Less:- Exemption Under sec 10(10) xxx XXX Perquisities (Taxable) XXX Entertainment Allowances XXX Gross Salary XXX Less :- Deductions U/S 16 xxx U/S 16(2) xxx U/S 16(3) xxx XXX Taxable Income from Salary XXX
  • 8. INCOME FROM HOUSE PROPERTY Sec 22 of Income Tax Act 1961 Income from houses, buildings, bungalows Tax is based on Annual value.
  • 9. POINTS TO BE REMEMBERED Assessee should be the Owner of the Property Should be not be used for Own Business or Profession In Case of Dispute Regarding Title Property Let Out along with other Assets In case of sub-Letting
  • 10. ANNUAL VALUE (SEC 23) EXPECTED RENT Municipal Rent Value (MRV) XXX Fair Rental Value (FRV) XXX Whichever is higher (ER) X X X ( If no SR) Standard Rent (SR) ( If available) XXX Whichever is less (ER) XXX FAIR RENT The rent which a similar property will fetch at the same or nearby similar locality.
  • 11. MUNICIPAL RENT The value fixed by the municipal or local authority STANDARD RENT Rent fixed by the Rent Control Act Max rent an owner can claim from his tenant as rent ACTUAL RENT Rent for which property has been let out
  • 12. CALCULATION OF GAV Particular House 1 House 2 MRV 1,05,000 1,05,000 FRV 1,07,000 1,07,000 Whichever is higher 1,07,000 1,07,000 SR 1,35,000 1,35,000 ER (Whichever is Less) 1,07,000 1,07,000 AR 1,12,000 98,000 GAV 1,12,000 1,07,000
  • 13. COMPUTION OF HOUSE PROPERTY INCOME Particulars amount amount Gross Annual Value xxx Less: Municipal tax -Paid by owner xxx Net Annual Value xxx Deduction U/S 24 1. Standard deduction -30% of NAV xxx 2. Int. on borrowed capital- Paid or due xxx xxx Income from House Property xxx
  • 14. Income from Profit/Gain from Business/Profession Chargeability Under sec 28 1. Profit/Gain from any business/Profession 2. Profit on sale of import entitlement license 3. Duty drawback 4. Value of benefit arising from any business/profession 5. Income derived by trade/profession 6. Income from speculative transaction 7. Income received under keyman insurance policy 8. Any interest,salary, Bonus, commision or remuneration received by partner of a firm.
  • 15. Case business income is not taxable u/s 28 • Rental business • Dividend on share • Speculative transactions excluded :-Hedging contracts and derivative transaction.
  • 16. How to compute PGBP U/S 30 Deductions allowed Rent taken Repairs not in a nature of capex Insurance premium U/S 31 Deductions allowed w.r.t plant & machinery. Sec 32 Depreciation
  • 17. Income from Capital Gain Chargeability U/S 45 (1) Capital Gain tax liability arises when following conditions get satisfied:- • There should be a Capital Asset • There should be a Transfer • Transfer should be in previous year • Result of transfer should be profit or gain • Such Profit/Gain is not exempt.
  • 18. Exemption for Capital Assets • Any Stock-in-Trade. • Movable Property (excludes jewellery archeological, Drawings, Paintings, Sculpture). • Agricultural Rural Land. • 65% Gold Bond -1977 / 7% Gold Bonds-1980/ National Defense Gold Bond issued by Central Government. • Special Bearer Bonds 1991. • Gold Deposit Bond issued under Gold deposit scheme 1999.
  • 19. Types of Capital Assets There are two types of Capital Assets I. Short Term Capital Asset II. Long Term Capital Asset
  • 20. Income from Other Sources Chargeability U/S 56(2) It includes the following • Dividend. • Windfall from lotteries crossword gambling. • Income by way of interest on securities. • Income from Royalty • Director fees • Income from investment