Heads of Income Tax

According to the Income Tax Act, there are 5 Heads of Income. They are:

• Income from salary

• Income from house property

• Income from profits and gains from business or profession

• Income from capital gains

• Income from other sources

          Each of these head has their own separate conditions that are needed to be fulfilled so as to make the income generated from these sources taxable. These conditions are mentioned in different Sections of the Income Tax Act.

INCOME FROM SALARY:

Any income that you earn as a result of the work you do under an employment contract is subject to taxation under this area. Compensation, advance salary, perquisites, gratuities, commissions, bonus pay, and pension are all included in this.

INCOME FROM HOUSE PROPERTY:

Income from house property is the area under which a person’s income from houses or other rental properties is taxable. Simply expressed, this head contains the method for computing the tax on the rental revenue that you receive from your properties. If you possess more than two self-occupied homes, only one of them is considered to be occupied; the rest are regarded as rental properties. Both commercial and residential property income are liable for tax.

INCOME FROM BUSINESS OR PROFESSIONAL:

Under this head, you must pay taxes on any business or professional profits that you make. To calculate the amount on which tax is due, deduct your total costs from your total income.

CAPITAL GAINS:

Profits from the transfer or sale of an asset held as an investment are taxable under the head of income from capital gains. Capital assets include a wide range of assets, including gold, bonds, mutual funds, housing, equities, etc.

INCOME FROM OTHER SOURCE:

Any other income not covered by the above four headings. They are covered under income from other sources includes lottery winnings, bank deposits, dividends, winnings from gaming, winnings from card games, winnings from sports, etc.