There are five heads of income under which an individual or entity's income can be categorized for income tax purposes. These are:
1. Income from Salary: This head includes income earned from employment, such as basic salary, allowances, perquisites, bonuses, and commissions.
Example: If an individual earns a basic salary of Rs. 6 lakh per annum and receives an annual bonus of Rs. 1 lakh, then their income under the head of income from salary would be Rs. 7 lakh.
2. Income from House Property: This head includes income earned from a house or property that an individual owns, such as rental income or notional rent.
Example: If an individual owns a house that is rented out and receives an annual rent of Rs. 3 lakh, then their income under the head of income from house property would be Rs. 3 lakh.
3. Income from Business or Profession: This head includes income earned from a business or profession, such as consultancy fees, professional fees, or profits from a business.
Example: If an individual runs a business and earns a net profit of Rs. 10 lakh in a financial year, then their income under the head of income from business or profession would be Rs. 10 lakh.
4. Income from Capital Gains: This head includes income earned from the sale of capital assets, such as stocks, mutual funds, property, or gold.
Example: If an individual sells stocks worth Rs. 2 lakh and earns a capital gain of Rs. 50,000, then their income under the head of income from capital gains would be Rs. 50,000.
5. Income from Other Sources: This head includes income earned from sources other than the four heads mentioned above, such as interest earned on savings accounts, fixed deposits, or any other investment.
Example: If an individual earns interest of Rs. 10,000 on their savings account, then their income under the head of income from other sources would be Rs. 10,000. It is important to note that an individual's total income is calculated by adding up their income from all the above-mentioned heads of income.
Comments