Sources of Income - best income tax and gst firms in bengaluru
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Sources of Income

Sources of Income

Income from Salary – This is income of an employee earned by him from his employer. Salary includes various components like basic salary / wages, gratuity, advance of salary, leave encashment, any annuity / pension, etc. The aggregate of all the components after specific exemptions (conveyance allowance, medical allowance, leave travel allowance etc.) is known as gross salary and charged under this head of income.

Income from House Property – This is rental income from renting of land or building owned by him. A standard deduction of 30% of rent is allowed against such income.

Income from Profits & Gains of Business or Profession – This is profit earned as a result of some business or profession set up. Profit is calculated as difference of revenue earned and expenses incurred while running business or profession. Some of the deductions allowed are depreciation on assets used for business, rent for premises, repairs of machinery and business and other general expenses directly pertaining to business activity.

Income from Capital Gains – This is profit or gain from sale of any capital asset held as investment. Capital asset is defined to include property of any kind, whether fixed or circulating, movable or immovable, tangible or intangible. It does not include – any stock in trade, consumable stores or raw material held for the purpose of business or profession, any personal effects of the assessee like wearing apparels and furniture for day to day use, agricultural land in rural area in India. Capital gain can be short term or long term. If any capital asset is held by assessee for a period of less than 36 months, it is termed as short term capital gain, otherwise, long term capital gain. However, in case of shares and securities, time limit is of 12 months.

Income from other sources – This is known as “residual head of income”. Thus any income which is not specifically covered under any of the above mentioned heads of income would be taxed under this head. Certain incomes which are always taxed under this head are dividend income, winning from lotteries, crossword puzzles, horse race, interest income from securities etc.

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