The word Income has a very broad meaning. It generally means a monetary return whether received in cash or kind. The income tax department does not make any distinction between temporary and permanent income. Every the temporary income or one time income is taxable.
For instance, if you are salaried person, then all that is received from an employer whether in cash, kind or as a facility is considered as income. For a businessman, his business profits will constitute income. Income may also flow from investments in the form of Interest, Dividend, and Commission etc. The Income Tax Act has classified all incomes earned by persons into 5 different heads. These are:
- 1- Income from Salary : Income can be charged under this head only if there is an employer-employee relationship. Salary includes wages, basic, dearness allowance, annuity, gratuity, advance of salary, allowances, commission, perquisites in lieu of or in addition to salary and retirement benefits. The aggregate of the above incomes, after exemptions available, is known as Gross Salary and this is charged under the head income from salary.
- 2- Income from House property : Any residential or commercial property that you own will be taxed as per the Income Tax Law. If you have home loan then interest part of it would also be considered as negative income from House property i.e. tax benefit is there on home loan.
- 3- Income from Business or Profession : Income earned through your profession or business is charged under the head ‘profits and gains of business or profession.’ Normally, The income chargeable to tax is the difference between the income received and expenses incurred.
- 4- Income from capital gains : Any profit or gain arising from transfer of capital asset held as investments (such as house,Jewellery) are chargeable to tax under the head capital gains. The gain can be on account of short- and long-term gains. Our article Basics of Capital Gain talks about in detail.
- 5- Income from other sources : Any income that does not fall under any of the above four heads of income is taxed under the head income from other sources. For eg. Dividend income, interest received from bank deposits etc.