Total income and various heads of income under Income Tax

Heads of income

As per the Income Tax act, 1961, an assessee’s income is calculated under various heads which include Salary, House Property, Profits and gains of Business or Profession, Income from Capital Gains and Income from Other Sources.

The gross total income of a person is the sum of the incomes under all the above heads.

Now, I will discuss each of the above income heads briefly:

1. Income from Salary – As the name suggests, it includes the amount received by an employee from an employer and includes part time job salary as well.
2. Income from House Property – This head includes the income from a let-out property and even a self-occupied property, in case there are more than 2 self-occupied properties, i.e., 2 self-occupied properties will be exempt under this head and the remaining will be treated as deemed let out property and will be taxable.
3. Profits and gains of Business or Profession – This head includes any profit or gain of any business or profession and certain other items which I will be discussing in a later blog.
4. Capital Gains – This includes any profit or gain arising from Transfer (to be discussed in a later blog) of a Capital Asset (to be discussed in later blog) and chargeable to tax in the Previous Year (discussed in a previous blog) in which transfer took place.
5. Income from Other Sources -This includes any income not chargeable under any of the above heads. Specific items of this head will be discussed in a later blog.

So, this was a gist of all the heads of income which form the gross total income of an assessee, which is used to calculate the net income (to be discussed in a later blog), and ultimately to calculate the tax payable or refundable to the assessee.