Income is very broad term. If we talk about salaried person, the payment and facilities he or she received is said as his or her income. In case of businessman, the net profits will constitute income. Dividend, Commission and Interest etc are also called income. In Income tax act, income is categorized into 5 different categories. Income Tax Act does not differentiate between legal and illegal income for purpose of taxation. Under the Act, all incomes earned by persons are classified into following heads:
- Income from Salary
- Income from House property
- Income from Business or Profession
- Income from capital gains
- Income from other sources
As far as receipts are concerned, receipts are of two types:
- Revenue receipt
- Capital receipt
All that one derives from a source is called revenue receipt. When an income is earned on account of transacting the source itself, it is called Capital receipt.
Income tax act are different for both types of receipts. All revenue receipts are taxable unless a receipt is specifically exempted and all capital receipts are exempt from taxation unless there is a provision to tax it. Gifts and loans come into the category of capital receipts. Gifts exceeding Rs 25,000 is taxable unless it is received from any relative or on marriage occasion or under will or by inheritance or in contemplation of death of the payer.
Income from lottery, prize money from competition, money received by a preacher from preaching, income from animal husbandry comes under taxable category whereas income received by a shareholder from dividend, income from agriculture is not taxable.
At the moment individual, HUF, AOP, and BOI having income below rupees one lakh need not pay any income tax. For other categories such as co-operatives societies, firms, companies and local authorities no such exempted limits exists, so they have to pay taxes on their entire income. In cases of senior citizens aged above 65 years and women the exempted limit for the financial year 2007-08 are rupees one lakh ninety thousand and one lakh forty thousand respectively.
For more information, please log on to http://incometaxindia.gov.in/
