The document discusses the different heads of income under the Indian Income Tax Act of 1961. It explains that there are five heads of income: 1) income from salary, 2) income from house property, 3) income from business or profession, 4) capital gains, and 5) income from other sources. It provides details on how to calculate taxable income for each head and the process for determining the total tax liability.

1. Income Under the 5 Heads

2. INTRODUCTION
A person receives income i.e.
taxable income from different
sources. All these different sources
of income are classified &
Assessed under certain group or
heads. These are know as “ Heads
of Income”

3. Income From Five Heads are as
Follows
1. Income from salary
2. Income from house property
3. Income from profit or gain from
business or profession.
4. Income from capital gain.
5. Income from other sources.

4. Complete Process of Computation of Taxable
Income & Tax
1) Determine the residential status of the
assesse
2) Determine the incidence of tax
3) Classify income after considering
specific exemption into respective
head.
4) Aggregate the income.
5) Apply clubing Provision.
6) Setoff/Carry forward losses (if any)
7) Balance shall be gross total income.

5. Cont
8.Allow deduction 80C to 80U chpt VI A.
9.Balance shall be total income.
10.Determine the tax payable, applying the rates
applicable.
11.Deduct rebate/relief of tax.
12.Add surcharge.
13.Add educational cess.
14.Balance is tax payable.
15.File return of income before the due date of filing.

6. What is Salary?
• Remuneration which is received by an
individual for services rendered by him
to undertake a contract whether it is
expressed or implied
• There has to be “employer –
employee” relationship.

7. Income From
Salary
Salaries U/S 17(1) include following:-
1. Wages
2. Pension
3. Gratuity
4. Any fees, Commission,
Perquisite,Profit in lieu of salary
5. Any advance salary etc

8. List of Allowance exempted from tax
1. Conveyance allowance .
2. Children education allowance .
3. Any allowance granted to an employee to meet the
hostel expenditure of his child .
4. Transport allowance .
5. House rent allowance .
6. Provident Fund .
7. Gratuity .
8. Leave travel concession .
9. Compensation received at the time of
voluntary retirement .
10. Encashment of earned leave at the time of retirement
.
11. Computation of pension .
12. Entertainment allowance .

9. Statement of total income from
salary
Particular Rs Rs
Basic salary XXX
Dearness Allowances (DA) XXX
House Rent Allowances xxx
Less :- Exemptions Under sec10 (13
A)
xxx XXX
Eduacation Allowances XXX
Less :- Exemptions Under sec10 (14) xxx XXX
Conveyance Allowance xxx
Less :- Exemption Under sec 10(14) xxx XXX
Bonus XXX
Gratuity xxx
Less:- Exemption Under sec 10(10) xxx XXX
Perquisities (Taxable) XXX
Entertainment Allowances XXX
Gross Salary XXX
Less :- Deductions
U/S 16 xxx
U/S 16(2) xxx

10. INCOME FROM HOUSE PROPERTY
Sec 22 of Income TaxAct 1961
Income from houses, buildings, bungalows
Tax is based on Annual value.

11. POINTS TO BE REMEMBERED
Assessee should be the Owner of the Property
Should be not be used for Own Business or
Profession
In Case of Dispute Regarding Title
Property Let Out along with otherAssets
In case of sub-Letting

12. ANNUAL VALUE (SEC 23)
EXPECTED RENT
FAIR RENT
The rent which a similar property will fetch at
the same or nearby similar locality.
Municipal Rent Value
(MRV) Fair Rental Value
(FRV)
Whichever is higher (ER)
Standard Rent (SR) ( If available)
Whichever is less (ER)
X X
X X
X X
X X X ( If no
SR) X X X
X X X

13. MUNICIPALRENT
The value fixed by the municipal or local
authority
STANDARD RENT
Rent fixed by the Rent Control Act
Max rent an owner can claim from his tenant as
rent
ACTUALRENT
Rent for which property has been let out

14. CALCULATION OF GAV
Particular House 1 House 2
MRV 1,05,000 1,05,000
FRV 1,07,000 1,07,000
Whichever is higher 1,07,000 1,07,000
SR 1,35,000 1,35,000
ER (Whichever is Less) 1,07,000 1,07,000
AR 1,12,000 98,000
GAV 1,12,000 1,07,000

15. COMPUTION OF HOUSE PROPERTY
INCOME
Particulars amount amount
Gross Annual Value
Less: Municipal tax -Paid by owner
Net Annual
Value Deduction U/S 24
1. Standard deduction -30% of NAV
2.Int. on borrowed capital- Paid or due
Income from House Property
xxx
xxx
xxx
xx
x
xxx
xxx
xxx

16. Income from Profit/Gain from
Business/Profession
Business means the purchase and sale or manufacture of a
commodity with a view to make profit. It includes any trade,
commerce or manufacture or any adventure (Doing activity for
the first time without knowing the outcome) or concern in the
nature of trade, commerce and manufacture.
Profession means the activities for earning livelihood which
require intellectual skill or manual skill, e.g. the work of a lawyer,
doctor, auditor, engineer and so on are in the nature of
profession. Profession includes vocation. Vocation : Vocation
implies natural ability of a person to do some particular work e.g.
singing, dancing, etc. Here, no training or no qualification is
required but having natural ability.

17. Income from Profit/Gain
from
Business/Profession
Conditions Business/Profession
1.There must be a business/profession
2.Business/profession is being carried
by assessee
3.Business/ profession have been
carried out by assessee in assessment
year for which income tax is filling.

18. Income from Profit/Gain from
Business/Profession
Chargeability Under sec 28
1. Profit/Gain from any business/Profession
2. Any Compensation due to or received by an agent
3. Receipts in connection with foreign trade
4. Value of benefit arising from any
business/profession
5. Income derived by trade/profession
6. Income from speculative transaction
7. Income received under keyman insurance policy
8. Any interest,salary, Bonus, commision
or remuneration received by partner of

19. How to compute PGBP
U/S 30Deductions allowed
Expenses in respect of business premises :
Rent taken
Repairs not in a nature of capex: Revenue
expenditure incurred on current repairs and
insurance premium incurred on plant and
machinery / furniture and fixture is allowed
Insurance premium
U/S 31 Deductions allowed w.r.t plant &
machinery. Sec 32 Depreciation

20. The deductions allowed are depreciation
of assets used for:
• Business;
• Rent for premises;
• Insurance and repairs
for machinery and
furniture;
advertisements;
• Travelling and many
more.

21. Income from Capital
Gain
Income which is derived from the transfer of
capital asset held as investments are
chargeable to tax under the head
“

22. What is a Capital Asset?
According to section 2(14), a capital asset means –
(a) property of any kind held by an assessee, whether or not connected with his
business or profession;
(b) any securities held by a Foreign Institutional Investor which has invested in
such securities in accordance with the SEBI regulations.
However, it does not include—
(i) Any stock-in-trade [other than securities referred to in (b) above],
consumable stores or raw materials held for the purpose of the business or
profession of the assessee;
(ii) Personal effects, that is to say, movable property (including wearing apparel
and furniture) held for personal use by the assessee or any member of his family
dependent on him, but excludes –
(a) Jewelry;
(b) Archaeological collections;
(c) Drawings;
(d) Paintings;
(e) Sculptures; or
(f) Any work of art.

23. (iii) Rural agricultural land in India
(iv) 6½% Gold Bonds, 1977, or 7% Gold Bonds, 1980, or
National Defence Gold Bonds, 1980, issued by the
Central Government;
(v) Special Bearer Bonds, 1991 issued by the Central
Government;
(vi) Gold Deposit Bonds issued under the Gold Deposit
Scheme, 1999 notified by the Central Government.

24. Two Type of Capital Asset
1.Short Term Capital Asset
2.Long Term Capital Asset
The short-term capital asset is a capital asset held by
an assessee for not more than 36 months immediately
preceding the date of its transfer. Therefore, a capital
asset held by an assessee for more than 36 months
immediately preceding the date of its transfer is a long-
term capital asset.

25. Income from Capital
Gain
Chargeability U/S 45 (1)
Capital Gain tax liability arises when
following conditions get satisfied:-
• There should be a Capital Asset
• There should be a Transfer
• Transfer should be in previous year
• Result of transfer should be profit or
gain
• Such Profit/Gain is not exempt.

26. Exemption for Capital
Assets
• Stock of goods and raw materials used
by assessee for his business or
profession
• Movable Property (excludes jewellery
archeological, Drawings, Paintings,
Sculpture).
• Agricultural Rural Land.

27. CALCULATION OF
STCG/LTCG
STCG= Full value of Consideration received or receivable- cost of
acquisition- cost of improvement- any expenditure wholly &
exclusively for transfer of asset
Long-term capital gain = full value of consideration received or
accruing – indexed cost of acquisition - indexed cost of
improvement - cost of transfer,
where:
Indexed cost of acquisition = cost of acquisition x cost inflation
index of the year of transfer/cost inflation index of the year of
acquisition.
Indexed cost of improvement = cost of improvement x cost
inflation index of the year of transfer/cost inflation index of the
year of improvement.

28. Income from Other Sources
General Provision- Section 56 (1) Income of every kind
which is not to be excluded from the total income
under this Act shall be chargeable to income-tax under
the head Income from other sources, if it is not
chargeable to income-tax under any other of the heads
such as
1) Salaries
2) House Property
3) Profit/ Gains from Business
4) Capital Gains

29. Income from Other
Sources
Chargeability U/S
56(2) It includes the
following
• Dividend.
• Windfall from lotteries crossword
gambling.
• Income by way of interest on securities.
• Income from Royalty
• Director fees
• Income from investment

30. DEDUCTIONS UNDER
SECTION 57
1I)n case of dividend or interest any reasonable sum by way of
commission or remuneration to a banker or any other person for
purpose of realising such income.
2) In case of recovery for funds (provident fund, super annuation
fund, etc.) full amount of income will be allowed as deduction if
such amount is credited (deposited) to fund by due date.
3) In case of letting of machinery, plant, furniture, etc. (a) Rent,
rates, taxes, repairs, insurance of assets as discussed u/s 30 and
31. (b) Depreciation on assets, if assessee is the owner.
4) In case of family pension – deduction of 33⅓% of such income
or ` 15,000 whichever is less.
5) Any other expenditure which is not a capital expenditure &
spent exclusively for earning such income.

31. AMOUNTS NOT
DEDUCTIBLE—SECTION 58
1) Personal expenses of the assessee.
2) Any interest paid outside India on which tax is not deducted at
source.
3) Any salary paid outside India on which tax is not deducted at
source.
4) Expenses covered by Section 40A of the Income Tax Act.
5) Any expenditure in connection with income by way of winning
from lotteries, card games, or other games of any sort, or
gambling or betting of any form will not be allowed as deduction.
However, in case of income from horse races, expenditure
incurred to maintain the horses shall be allowed as deduction if
assessee is the owner of horses, and horses are maintained for
running in horse races.

32. Thank You!!!
