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      Heads of Income for Tax Computation

      Sunday, July 31st, 2016 Amritesh one response

       
      The various Sources of Income which is taxable under the Income Tax Act has been discussed below. This is a brief of the various Income Heads which are chargeable to tax, details pertaining to the each head will be discussed in my future posts.

      Income Tax Filing: Types of Income Tax Forms

      How to e-File Income Tax Return (ITR1- Sahaj)?
       
      Income from Salary:Any monetary or facility benefit extended by an Employer to Employee in lieu of service provided is called Salary. For computation of income from “Salary” it important to establish an “Employee “, “Employer” relationship between the provider and receiver.
       
      Components of Salary Include:
      Basic Pay
      Dearness Allowance
      House Rent Allowance
      Allowance
      Conveyance Allowance
      Medical Allowance
      Deputation Allowance
      City Compensatory Allowance
      Child Education Allowance
      Overtime Allowance
       
      Income from House Property: Income earned in form of rent from Land, Building or Apartment constitutes Income from House Property. However, Self Occupied house is exempted from tax. Tax is applicable on property which are let out or deemed to be let out. Deduction is available Under Section 24 (a) and interest on loan Under Section 24 (b) for purchase, reconstruction or repair of the property.
       
      Income from Profits and Gains of Business or Profession: Income from Business or Profession is taxed under this head. Any profits and Gains of business or Income derived out of rendering professional service is taxed under this head. Deductions are available for the expenditure incurred in running the business.
       
      Income from Capital Gains: Income arising from transfer of capital assets (Land, House, etc) held is taxed under Capital Gains. It may be a Long Term Capital and Short Term Capital gain.
       
      Short Term Assets: Any asset held for less than 36 months qualifies as Short term capital assets. However, Stocks and Mutual Funds qualify as short term assets if held for less than 12 months.
       
      Long Term Assets: Any Asset held for more than 36 months qualifies as Long term capital assets. Stocks and Mutual Funds held for more than 12 months qualifies as Long term capital assets.
       
      Income from Other Sources: Any income which is specifically not taxed under any other head of income is taxed under this head.
      It includes:
      Interest Income
      Dividends (If Applicable)
      Winnings from Lottery, Horse Races, etc
      Gifts
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      Amritesh is an experienced professional in the field of HR, Finance and Compliance. He is currently working in the IT Industry with an US based firm. He took up Blogging as a hobby which eventually turned into passion. He primarily focuses on topics related to Personal Finance, HR, Compliance and Technology.
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