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Today we are discuss on income tax in India,  how income earned from business,salary,purchase and sale of property etc  is taxable in India.

Different Heads of Income Tax in India as per Income Tax Act, 1961

There are five heads of income defined in Income Tax Act, 1961 under which income is taxable –

  • Income from Salary
  • Income From House Property
  • Income From Business or Profession
  • Income From Capital Gains
  • Income from Other SourcesNow we are going to discuss on each topic one by one in brief:

(I) Income From Salary:

There should be an Employer & Employee relationship to create an income from Salary. Provisions relating to Salary are covered by section 15, 16 & 17 of the Income Tax Act, 1961. Employer while making payment of Salary to employee is liable to deduct TDS as per section 192 of the I T Act, 1961(liability arises only when Employer was covered by Tax Audit in Preceding Year). ITR 1 is to be filled when there is only an income from Salary

(II) Income From House Property:

There should be a house property to create an income from this source. House property may be of various types like:
(A) Self Occupied Property
(B) Let out Property
(C) Partially Self Occupied & Partially Let Out Property
Section 22-27 of I T Act, 1961 Covers the provision relating to Income From House Property.

(III) Income From Business or Profession (Profits & Gains from Business or Profession):

Provisions relating Profits & Gains from Business or Profession are covered by section 28 to 44DB of I T Act, 1961. Profit & Gain from all the businesses or Professions are covered under this head. This head is very broad. All type of businesses income whether small, medium or large are taxable under this head.

(IV) Income From Capital Gain:

When a Capital Asset is transferred, Capital Gain arises & this capital gain is taxable here under this head. Capital Gain are divided into two parts:

(A)  Long term capital gains (B) short term capital gains

Specific Income Tax Rates are Prescribed for Long Term & Short Term Capital Gains. Section 45 to 55A Covers the provisions relating to all the income from capital gains.

(V) Income from Other Sources:

All the incomes which are not covered under all the above heads are taxable under this head. Section 56-59 explains the provision relating to income from other sources. This head includes the income like:
(A) Dividend Income (not taxable under above heads)
(B) Interest Income (not taxable under above heads)
(C) Other Incomes (not taxable under above heads)


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