2. INTRODUCTION
As per the Section 14 Income Tax Act,1961, there are five main income
tax heads for an individual. The computation of income tax is an
important part and has to be calculated according to the income of a
person. The government has classified the sources of income under
separate heads and then the income tax is computed accordingly. The
provisions and rules are according to the details mentioned in the
Income Tax Act 1961.
3. FIVE MAIN HEADS OF
INCOME
• Income from Salary
• Income from House Property
• Income from Business
• Income from Capital Gains
• Income from Other Sources
4. INCOME FROM SALARY
• The first head of Income Tax heads is
income from salary .This clause
essentially assimilates any
remuneration, which is received by an
individual in terms of services provided
by him based on a contract of
employment. This amount qualifies to be
considered for income tax only if there is
an employer-employee relationship
between the payer and the payee
respectively. Salary also should include
the basic wages or salary, advance
salary, pension, commission, gratuity,
perquisites as well as the annual bonus.
5. INCOME FROM HOUSE PRORERTY
The second head of Income Tax heads is Income from house
property, According to the Income Tax Act 1961, Sections 22 to
27 is dedicated to the provisions for the computation of the total
standard income of a person from the house property or land
that he or she owns. An interesting aspect is that the charge is
derived out of the property or land and not on the amount of
rent received.
6. INCOME FROM BUSINESS AND PROFESSION
• “Profit and gains of business or profession”
is one of the heads of income under the
Income Tax Act. Business profits is the
third head of income under the Act, after
salaries and house property income. This
head is used to classify or aggregate
income which the taxpayer generates
through business or professional activities.
While filing an income tax return, the
taxpayer must declare the amount of
profits and gains of business or profession
in case the assessee is having any such
income.
7. INCOME FROM CAPITAL GAINS
Capital gains refer to any profit or gain that
arises from the sale of a capital asset. This gain
or profit is charged to tax in the year in which
the transfer of the capital asset takes place.
When there is a transfer (sale, exchange,
relinquishment, extinguishment, compulsory
acquisition, conversion, maturity, redemption,
etc) of a capital asset then capital gains are
charged to income tax. Also, if an inherited
asset is sold by the person who inherits it,
capital gains tax will be applicable.
8. INCOME FROM OTHER SOURCES
Any income that is not covered in the other
remaining four heads of income is taxed
under income from other sources. It is
referred to as residuary head of income.
Incomes excluded from salary, house
property, business & profession (PGBP) or
capital gains are covered in Income from
Other Sources, barring incomes that are
exempt under the Income Tax Act.
