The Income Tax Act, 1961 (ITA) divides income into five heads for taxation purposes:

• Income from salary

This includes income earned by an individual in the form of salary, wages, commissions, bonuses, and any other remuneration received from an employer.

• Income from house property

This includes income earned from letting out a house or property, as well as any capital gains arising from the sale of a house or property.

• Income from profits and gains of business or profession

This includes income earned by an individual from carrying on a business or profession, such as profits, gains, and dividends.

• Income from capital gains

This includes income earned from the sale of assets, such as shares, bonds, and immovable property.

• Income from other sources

This includes income that does not fall under any of the above heads, such as income from lottery winnings, gifts, and interest on savings accounts.

The income earned under each head is taxed at different rates, depending on the type of income and the taxpayer’s income slab. For example, income from salary is taxed at progressive rates, which means that the higher your income, the higher the tax rate you will pay.