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Heads of Income ( Sec 14, 14 A ) 
Lecture 6
Introduction 
A person receives income i.e. taxable income 
from different sources. All these different 
sources of income are classified & Assessed 
under certain group or heads. These are know 
as “ Heads of Income”.
Heads of Income 
• Income From Salary 
• Income From House Property 
• Income From Profit or Gain from Business or 
Profession 
• Income From Capital Gain 
• Income From Other Sources
What is Salary 
• Remuneration which is received by an 
individual for services rendered by him to 
undertake a contract whether it is expressed 
or implied 
• There has to be “employer – employee” 
relationship.
Income From Salary 
Salaries U/ S 17 ( 1 ) include the following 
1.Wages 
2.Pension 
3.Gratuity 
4.Any Fees, Commission, Perquisite, Profit in Lieu of Salary 
5.Any Advance Salary 
6.Bonus 
7.Annuity 
8. Income From Provident Fund 
9.Leave Encashment 
10.Allowances
List of Allowances Exempted From Tax 
• Conveyance Allowance 
• House Rent Allowances 
• Entertainment Allowance 
• Any Allowance granted to an employee to 
meet the hostel expenditure of his child 
• Children Education Allowance 
• Overtime Allowance
Income From House Property 
It is defined as income which is earned by a 
person through his house or land 
The building can be house, office building, go 
downs etc. 
Points to be remembered 
1.Assessee should be Owner of the Property 
2.Should be not be used for Business or Profession 
3.In case of dispute regarding title 
Tax is based on Annual Value
Annual Value 
Fair Rent – The rent which a similar property will fetch at the same or 
nearby similar locality 
Municipal Rent – The value fixed by municipal or local authority 
Fair Rent or Municipal Rent whichever is higher taken into consideration 
Standard Rent – Rent which a owner can claim maximum from his tenant 
Actual Rent – Rent for which property has been let out. 
Standard Rent or Actual Rent whichever is lesser is taken into 
Consideration
Income From Profit/ Gain From 
ConditionBs usiness/Profession 
1.There must be a business/profession 
2.Business/profession is being carried by 
assessee 
3.Business/ profession have been carried out by 
assessee in assessment year for which income 
tax is filling.
Income From Profit/ Gain From 
Business/Profession 
• Profit/Gain from any businesses/profession 
• Profit on sale of import entitlement License 
• Income derived by trade/profession 
• Any interest, salary, bonus, commission or 
remuneration received by partner of firm
• The deductions allowed are depreciation of 
assets used for 
• Business; 
• Rent for premises; 
• Insurance and repairs for machinery and 
furniture; advertisements; 
• Travelling and many more.
Income From Capital Gain 
What is Capital Gain 
- Income which is derived from the transfer of 
capital asset held as investments are 
chargeable to tax under the head “ Capital 
Gains” 
- Two Type of Capital Asset 
1.Short Term Capital Asset 
2.Long Term Capital Asset
Capital Gain tax liability when following 
conditions gets satisfied 
1.There should be a capital asset 
2.There should be transfer 
3.Transfer should be of previous year 
4.Result of Transfer should be profit or gain 
E.g. Goodwill of business
Exceptions 
1.Stock of goods and raw materials used by 
assessee for his business or profession 
2.Movable Property ( wearing apparel, 
furniture, automobile, phone etc.) held by the 
assessee. Jewellery which is a movable asset 
comes under the head of Capital Asset
Income From Other Sources 
• Any income that does not fall under the four 
heads above is taxed under the head “ Income 
From Other Sources”. 
• E.g. – Dividend, Winning of Lottery, Income 
from Royalty, Income by way of interest on 
Securities, Income From Letting out 
machinery, plant or Furniture on Hire basis.
THANK YOU

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Lecture 6 heads of income

  • 1. Heads of Income ( Sec 14, 14 A ) Lecture 6
  • 2. Introduction A person receives income i.e. taxable income from different sources. All these different sources of income are classified & Assessed under certain group or heads. These are know as “ Heads of Income”.
  • 3. Heads of Income • Income From Salary • Income From House Property • Income From Profit or Gain from Business or Profession • Income From Capital Gain • Income From Other Sources
  • 4. What is Salary • Remuneration which is received by an individual for services rendered by him to undertake a contract whether it is expressed or implied • There has to be “employer – employee” relationship.
  • 5. Income From Salary Salaries U/ S 17 ( 1 ) include the following 1.Wages 2.Pension 3.Gratuity 4.Any Fees, Commission, Perquisite, Profit in Lieu of Salary 5.Any Advance Salary 6.Bonus 7.Annuity 8. Income From Provident Fund 9.Leave Encashment 10.Allowances
  • 6. List of Allowances Exempted From Tax • Conveyance Allowance • House Rent Allowances • Entertainment Allowance • Any Allowance granted to an employee to meet the hostel expenditure of his child • Children Education Allowance • Overtime Allowance
  • 7. Income From House Property It is defined as income which is earned by a person through his house or land The building can be house, office building, go downs etc. Points to be remembered 1.Assessee should be Owner of the Property 2.Should be not be used for Business or Profession 3.In case of dispute regarding title Tax is based on Annual Value
  • 8. Annual Value Fair Rent – The rent which a similar property will fetch at the same or nearby similar locality Municipal Rent – The value fixed by municipal or local authority Fair Rent or Municipal Rent whichever is higher taken into consideration Standard Rent – Rent which a owner can claim maximum from his tenant Actual Rent – Rent for which property has been let out. Standard Rent or Actual Rent whichever is lesser is taken into Consideration
  • 9. Income From Profit/ Gain From ConditionBs usiness/Profession 1.There must be a business/profession 2.Business/profession is being carried by assessee 3.Business/ profession have been carried out by assessee in assessment year for which income tax is filling.
  • 10. Income From Profit/ Gain From Business/Profession • Profit/Gain from any businesses/profession • Profit on sale of import entitlement License • Income derived by trade/profession • Any interest, salary, bonus, commission or remuneration received by partner of firm
  • 11. • The deductions allowed are depreciation of assets used for • Business; • Rent for premises; • Insurance and repairs for machinery and furniture; advertisements; • Travelling and many more.
  • 12. Income From Capital Gain What is Capital Gain - Income which is derived from the transfer of capital asset held as investments are chargeable to tax under the head “ Capital Gains” - Two Type of Capital Asset 1.Short Term Capital Asset 2.Long Term Capital Asset
  • 13. Capital Gain tax liability when following conditions gets satisfied 1.There should be a capital asset 2.There should be transfer 3.Transfer should be of previous year 4.Result of Transfer should be profit or gain E.g. Goodwill of business
  • 14. Exceptions 1.Stock of goods and raw materials used by assessee for his business or profession 2.Movable Property ( wearing apparel, furniture, automobile, phone etc.) held by the assessee. Jewellery which is a movable asset comes under the head of Capital Asset
  • 15. Income From Other Sources • Any income that does not fall under the four heads above is taxed under the head “ Income From Other Sources”. • E.g. – Dividend, Winning of Lottery, Income from Royalty, Income by way of interest on Securities, Income From Letting out machinery, plant or Furniture on Hire basis.