Income Under the 5

Heads
Sudhir
Yadav

Income From Five Heads are as

Follows
1. Income from salary
2. Income from house property
3. Income from profit or gain from
business or profession.
4. Income from capital gain.
5. Income from other sources.

Complete Process of Computation of

Taxable Income & Tax
1) Determine the residential status of
the assesse
2) Determine the incidence of tax
3) Classify income after considering
specific exemption into respective
head.
4) Aggregate the income.
5) Apply clubing Provision.
6) Setoff/Carry forward losses (if any)
7) Balance shall be gross total income.

Cont

8. Allow deduction 80C to 80U chpt VI A.

9. Balance shall be total income.
10. Determine the tax payable, applying the rates
applicable.
11. Deduct rebate/relief of tax.
12. Add surcharge.
13. Add educational cess.
14. Balance is tax payable.
15. File return of income before the due date of filing .

Income From Salary

Salaries U/S 17(1) include following:1. Wages
2. Pension
3. Gratuity
4. Any fees, Commission,
Perquisite,Profit in lieu of salary
5. Any advance salary etc

List of Allowance exempted

from tax

1. Conveyance allowance .
2. Children education allowance .
3. Any allowance granted to an employee to meet the
hostel expenditure of his child .
4. Transport allowance .
5. House rent allowance .
6. Provident Fund .
7. Gratuity .
8. Leave travel concession .
9. Compensation received at the time of voluntary
retirement .
10.Encashment of earned leave at the time of retirement .
11.Computation of pension .
12.Entertainment allowance .

Statement of total income

from salary

Less :
Less :
Less :

Less:

Less :

Particular
Basic salary
Dearness Allowances (DA)
House Rent Allowances
Exemptions Under sec10
(13 A)
Eduacation Allowances
Exemptions Under sec10
(14)
Conveyance Allowance
Exemption Under sec
10(14)
Bonus
Gratuity
Exemption Under sec
10(10)
Perquisities (Taxable)
Entertainment Allowances
Gross Salary
Deductions
U/S 16
U/S 16(2)

Rs

xxx

Rs
XXX
XXX

xxx
XXX

XXX

xxx
xxx

XXX

xxx

xxx

XXX
XXX

xxx

xxx
xxx

XXX
XXX
XXX
XXX

INCOME FROM HOUSE PROPERTY

Sec 22 of Income Tax Act 1961
Income from houses, buildings, bungalows
Tax is based on Annual value.

POINTS TO BE REMEMBERED
Assessee should be the Owner of the Property
Should be not be used for Own Business or
Profession
In Case of Dispute Regarding Title
Property Let Out along with other Assets
In case of sub-Letting

ANNUAL VALUE

(SEC 23)

EXPECTED RENT
Municipal Rent Value (MRV)

XXX

Fair Rental Value (FRV)

XXX

Whichever is higher (ER)

XXX

( If no SR)

Standard Rent (SR) ( If available)

XXX

Whichever is less

XXX

(ER)

FAIR RENT

The rent which a similar property will fetch at

the same or nearby similar locality.

MUNICIPAL RENT
The value fixed by the municipal or local authority
STANDARD RENT
Rent fixed by the Rent Control Act
Max rent an owner can claim from his tenant as
rent
ACTUAL RENT
Rent for which property has been let out

CALCULATION OF GAV
Particular
MRV

House 1
1,05,000

House 2
1,05,000

FRV

1,07,000

1,07,000

Whichever is higher

1,07,000

1,07,000

SR

1,35,000

1,35,000

ER (Whichever is Less)

1,07,000

1,07,000

AR

1,12,000

98,000

GAV

1,12,000

1,07,000

COMPUTION OF HOUSE PROPERTY

INCOME
Particulars

amount

Gross Annual Value

Less: Municipal tax -Paid by owner

Net Annual Value

Deduction U/S 24

1. Standard deduction -30% of

NAV
2. Int. on borrowed capital- Paid
or due

Income from House Property

amount

xxx
xxx

xxx

xxx

xxx

xxx

xxx

Income from Profit/Gain from

Business/Profession
Chargeability Under sec 28
1. Profit/Gain from any business/Profession
2. Profit on sale of import entitlement license
3. Duty drawback
4. Value of benefit arising from any
business/profession
5. Income derived by trade/profession
6. Income from speculative transaction
7. Income received under keyman insurance
policy
8. Any interest,salary, Bonus, commision or

Case business income is not

taxable u/s 28
Rental business
Dividend on share
Speculative transactions
excluded :-Hedging contracts and
derivative transaction.

How to compute PGBP

U/S 30 Deductions allowed
Rent taken
Repairs not in a nature of capex
Insurance premium
U/S 31 Deductions allowed w.r.t plant &
machinery.
Sec 32 Depreciation

Income from Capital Gain

Chargeability U/S 45 (1)
Capital Gain tax liability arises when
following conditions get satisfied: There should be a Capital Asset
There should be a Transfer
Transfer should be in previous year
Result of transfer should be profit or gain
Such Profit/Gain is not exempt.

Exemption for Capital

Assets
Any Stock-in-Trade.
Movable Property (excludes jewellery
archeological, Drawings, Paintings, Sculpture).
Agricultural Rural Land.
65% Gold Bond -1977 / 7% Gold Bonds-1980/
National Defense Gold Bond issued by Central
Government.
Special Bearer Bonds 1991.
Gold Deposit Bond issued under Gold deposit
scheme 1999.

Types of Capital Assets

There are two types of Capital Assets
I. Short Term Capital Asset
II. Long Term Capital Asset

Income from Other

Sources
Chargeability U/S 56(2)
It includes the following
Dividend.
Windfall from lotteries crossword
gambling.
Income by way of interest on securities.
Income from Royalty
Director fees
Income from investment

Thank You!!!