FIVE HEADS OF INCOME

1. INCOME UNDER HEAD SALARIESINCOME FROM HOUSE PROPERTY1. PROFITS AND GAINS OF BUSINESS

OR PROFESSIONS2. CAPITAL GAINS3. INCOME FROM OTHER SOURCES

INCOME FROM SALARY Income can be charged only if there is an employer

employee relationship between the payer and payee.

SALARY INCLUDES :Basic salary or wagesAny annuity or pensionGratuityAdvance of salaryLeave encashment CommissionRetirement benefits.

GROSS SALARY The aggregate of the above

incomes , after exemption available , is known as Gross Salary

and this charged under the head income from salary.

Basic salary along with commission and bonuses is fully taxable.

ALLOWANCESAn allowance is a fixed monetary amount paid by the employer to

the employee for expenses related to office work. Allowance

are generally included in the salary and taxed unless there are

exemption available.

FULLY TAXABLE ALLOWANCE

Dearness allowance. City compensatory

allowance. Overtime allowance Servant allowance Lunch allowance

EXEMPTED ALLOWANCE

Conveyance allowance .House rent allowance

(HRA).Leave travel allowance

(LTA).Medical allowance

Allowance/ExemptionAllowances Exemption

1. Conveneyance allowance2. House rent allowance3. Leave travel allowance4. Medical allowance

1. Upto Rs 800 per month.2. On certain calculation.3. Twice in the block of two

year.4. Upto Rs 15000 per annum

is tax free.

PERSONAL ADVANTAGES

•Perquisites are benefits in addition to normal salary to which an employee has a

right by way of his employment.•Employer gives Form 16 which will contain

all the earnings, deduction and exemption available.

INCOME FROM HOUSE PROPERTY

•Any residential , industrial or commercial property that you

own will be taxed as well. Even if your house property is not let out, it will be considered as

deemed to be let out and you need to pay tax on it.

PROFITS AND GAINS OF BUSINESS OR PROFESSION

Any income earned by any businessman / professionals will be taxable under this head of income

The income chargeable to tax is the difference between the credits received on running the business and expenses

incurred. Deduction allowed -:

1.Expenses directly related to Business.2.Depreciation of assets used3.Rent for premises4. Insurance5.Repairs of machinery, furniture6.Advertisements7.Travelling etc.

CAPITAL GAINS•Any profit or gains arising from transfer of the capital assets held as investment

are chargeable to tax under the head “CAPITAL

GAINS”.

Capital gains

•For esample :-•Sale of building•Sale of land•Sale of shares, debentures etc.

INCOME FROM OTHER SOURCES

Any income that does not fall under the four heads above is taxed under the head “INCOME FROM OTHER SOURCES”. Certain examples are-:

1.Income from bank deposits2.Winning from lottery3.Sum of money exceeding Rs. 50,000.

(received from person other than relative)4.Income from bank interest5.Income from divident