Q.What is meant by 'Heads of Income' under Section 14 of the Income Tax Act, 1961? Name the five heads.

Every kind of income a person earns has to be slotted into one of a fixed, small set of categories before it can be computed.

Section 14 of the Income Tax Act, 1961 groups every possible item of income a person can earn, from whatever source, under exactly five broad heads, so that computation rules can be applied consistently:

1. Salaries — income from an employer-employee relationship.
2. Income from House Property — income from ownership of a building or land appurtenant to it.
3. Profits and Gains of Business or Profession — income from carrying on a business or practising a profession.
4. Capital Gains — profit or gain arising from the transfer of a capital asset.
5. Income from Other Sources — a residuary head, covering any income that does not fall under the first four heads (e.g., interest income, family pension, lottery winnings). …

Students sometimes list 'Agricultural Income' as a sixth Head — agricultural income is a separate, generally exempt category under Section 10(1) (not part of this chapter's six named …