Under Indian income tax law, income is classified into different heads or categories, each with its own set of rules and tax treatment. Here are the primary types of income taxable under Indian law:
Income from Salaries:
- This includes wages, salaries, bonuses, pensions, gratuities, and other compensation for services rendered. It also covers allowances and perquisites provided by the employer.
Income from House Property:
- Income earned from owning a house property, including rental income. This head also includes notional income from a property that is not rented out but is considered to be used for self-occupation.
Income from Business or Profession:
- Income earned from running a business or practicing a profession. This includes profits from business operations, freelance work, and consultancy fees. Business income is subject to various provisions related to deductions, depreciation, and other allowances.
Income from Capital Gains:
- Income derived from the sale of capital assets, such as property, stocks, bonds, and mutual funds. Capital gains are classified into short-term and long-term, depending on the holding period of the asset before its sale. Different tax rates apply to short-term and long-term capital gains.
Income from Other Sources:
- This category includes any income that does not fall under the other four heads. Examples include:
- Interest income from savings accounts, fixed deposits, and bonds.
- Dividends from shares.
- Winning from lotteries, gambling, and betting.
- Income from rent of plant and machinery.
- Royalty income.
- Income from any other source not specifically covered under the other heads.
Each type of income has specific rules regarding deductions, exemptions, and tax rates. For instance, salaried individuals can claim deductions under sections like 10(14) for allowances, 80C for investments, and others. Similarly, capital gains have specific provisions for exemptions and deductions, such as Section 54 for reinvestment in property.
Understanding these different types of income and their tax implications is crucial for proper tax planning and compliance.
