Q.'The Income Tax Act, 1961 recognises five Heads of Income.' Do you agree? List the five heads and state one example of income falling under each.

Section 14 fixes the five categories every item of income must be classified under.

Yes, this statement is correct. Section 14 of the Income Tax Act, 1961 fixes exactly five Heads of Income, and every item of income a person earns must be classified under one of them:

1. Salaries — e.g., monthly salary received from an employer.
2. Income from House Property — e.g., rent received from a let-out flat.
3. Profits and Gains of Business or Profession — e.g., profit earned from running a retail shop.
4. Capital Gains — e.g., gain arising on the sale of a residential plot held for several years.
5. Income from Other Sources — e.g., interest earned on a savings bank deposit. …

Giving an example that actually fits a DIFFERENT head from the one it is listed under (e.g., citing 'rent from a shop building used in one's own business' as House Property income, when it may instead be a business expense/inc …