Sources Of Income: Source For People To Earn, Source For

Government To Tax
June 2, 2016 - Income Tax for Starters (Basics)

(Last Updated On: March 9, 2017)

Often at the time of ling income tax return, many of us face a common dilemma as to what is the criterion based upon which
bifurcation of earnings in dierent heads is to be done. Whether salary received by a partner from partnership rm is taxed
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 under Income from salary head or under Prots and Gains from Business or Profession or whether interest earned on
saving bank accounts is chargeable to tax or not are some of the common issues faced by all of us. Our todays article shall try
to provide a solution to all such issues and help you bifurcate your income in an easy manner.

Lets look at the heads which makes your total Income.

Income from Salary-

If the employer-employee relationship exists between payer and payee, then the amount received from payer to payee is
charged under the head salary. Salary includes basic salary or wages, any annuity or pension, gratuity, advance salary, leave
encashment, allowances and perquisites.

While salary along with commissions and bonus is fully taxable, certain provisions related to partial exemptions and fully
exemptions of income tax have been provided in respect of allowances and perquisites.

Income from House property-

Tax shall be charged on basis of propertys annual value which shall be higher of fair rental value, rent received or municipal
rent. Interest paid on home loan taken for construction or purchase of house property shall be deducted from such income
along with 30% standard deduction and then income from house property shall be calculated. For more information on
provisions related to payment of interest on home loan, click here.

Profits and gains from Buisness/ Profession-

Income earned through business or profession is charged under this head. Such income is derived by calculating gross
income earned, then deduct expenses incurred to earn such income from gross income and nally net income arrived is
taxed. Losses incurred under the head shall be eligible to be set off or carried forward to next A.Y.

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 Capital Gains
You might be having some capital asset during the year held as investments which you have transferred to another person.
Prot or gains arising on such transfer shall be taxed under this head. Prots or gains can be of two types Short term capital
gains (STCG) or Long term capital gains (LTCG). If you have held a capital asset for not more than 12 months in case of shares
or not more than 36 months in case of any other asset; then the gain arising on transfer of such asset shall be short term
otherwise it will be long term capital gain.

Income From Other Source

It is the residual head of income. So if your income doesnt fall in any of the above category, then it shall be taxed under this
head. Some of the earnings that can be taxed under this head are:

Dividends;

Interest earned from saving bank account;

Interest earned on Fixed Deposits;

Gifts etc

So your final computation is ready :

Income from salary XXX

Income from House Property XXX

Profits and gains of business or profession XXX

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 Income from salary XXX

Capital gains XXX

Income from other sources XXX

Income of other person to be included in assessee total income/ Aggregation of income XXX

Adjustments of losses C/F and set off (XXX)

Gross Total Income XXX

Less: Deductions XXX

Total Income XXX

Tax liability at applicable tax rate of relevant A.Y. XXX

Less: Rebate u/s 87A/ 86/ 90/ 90A/ 91 XXX

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 Income from salary XXX

Balance tax payable XXX

Less: TDS/ TCS/ Advance Tax XXX

Add: Interest u/s 234A/ 234B/ 234C XXX

Self Assessment tax u/s 140A XXX

Dont worry; you concentrate on earning income; we shall take care of sources under which your income falls and will le your
return of income.

For more knowledge on issues related to sources of income and other tax related issues, check out our other blogs.

Author

Team Tax2win

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Income Tax for Starters (Basics) Income Tax for Starters (Basics)

Thank yu for another fantatic post. The place else could

anybody get that kind of info n such a perfct means of writing?

Ive a preentation ubsequent eek, nd I am at the search for such information.

June 24, 2016 at 5:37 pm

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