TaxSaral

Section 13 · was Section 14 in the 1961 Act

Heads of Income

Total income is classified under five heads: (A) Salaries, (B) Income from House Property, (C) Profits and Gains of Business or Profession, (D) Capital Gains, and (E) Income from Other Sources.

Who it applies to: Every taxpayer — all income must be classified into one of these five heads.

Key points

  • Income cannot be taxed under more than one head — it must fall under the most specific head.
  • Each head has its own computation rules, allowed deductions, and loss set-off restrictions.
  • Losses from one head can generally be set off against gains from another head, with important exceptions (e.g., capital gains losses can only be set off against capital gains).
  • After computing income under each head, all five are added to arrive at Gross Total Income.

Worked example

Salaried employee with multiple income streams

Priya earns a salary, has a rented flat, received dividends and FD interest, and sold mutual fund units. How is her income classified?

Head A – Salaries: ₹15,00,000 gross salary
Head B – House Property: ₹2,40,000 net rental income (after interest deduction)
Head C – PGBP: Nil (no business)
Head D – Capital Gains: ₹80,000 LTCG on equity MF units
Head E – Other Sources: ₹50,000 (dividends ₹30K + FD interest ₹20K)

Gross Total Income = 15,00,000 + 2,40,000 + 80,000 + 50,000 = ₹17,70,000

Result: Each head is computed separately before they are summed. Priya can claim deductions (like standard deduction from salary) before arriving at Total Income.

Related sections

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Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative; verify with a Chartered Accountant before filing.