Under the Income Tax Act, the sources of income of an individual are categorized under five different heads. The five heads of income are as follows:

  • Income from salary
  • Income from house property
  • Income from business or profession
  • Income from capital gains
  • Income from other sources

A person can have more than one source of income at a time during a previous year. The income earned by the assessee in the previous year is taxable at his hands during the assessment year. It is also not necessary that a source of income from which a person has earned income in the previous year, is still in existence in the assessment year. A previous year is the year in which the assessee has earned the income and the assessment year is the year in which the assessee has to pay tax, if any, on the income incurred.

For e.g. A person has earned income in the year 2016-2017, thus his previous year will be 2016-2017, i.e., 1st April 2016- 31st March, 2017 and his Assessment year will be 2017-2018 i.e. 1st April, 2017- 31st March, 2018.

To calculate the gross total income of an individual, all sources through which an individual earns an income is added and thus the gross total income is derived. From the gross total income then the deductions allowable to the individual is deducted and ultimately the total income is deduced. This total income is the taxable income on which the assessee has to pay income tax. The income tax on the taxable income is chargeable according to the income slab of an assessee. Only if the assessee has an income of more than Rs.250000, then the assessee is made to pay tax.  This slab and its chargeability is subject to change in every financial year. If the income of the assessee is more than Rs. 2,50,000, but less than Rs. 5,00,000, then the assessee has to pay tax @ 10% of the income. If the income of the assessee is more than Rs. 5,00,000 but less than Rs. 10,00,000, then the rate of taxation will be 20% of the income and if the income of the assessee is more than Rs. 10,00,000 then the rate of tax will be 30% of the income.

After the calculation of tax either @ 10%,20% or 30%, deduction under Section 87 A @ Rs. 5000 is available to the assessee. On the remaining amount after deducting the rebate u/s 87 A from the tax amount, education cess @ 3% is charged and thus the total amount is arrived at that is required to be paid by the assessee. If the taxation amount is not paid within the due date then interest is chargeable @ 1% on the total amount for the number of months the delay was made. If any tax is deducted at source, which is higher than the tax payable, then the excess amount that is already deducted from the income of the assessee shall be given as refund to the assessee.

Asst .Prof of Law – Ruchi Agarwal .



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