Income from Salary

1. Salary is defined as the remuneration that a person receives periodically for rendering services based on an implied or express contract.
2. The Salary for the purpose of calculation of income from Salary includes:

• Wages
• Pension
• Annuity
• Gratuity
• Advance Salary paid
• Fees, Commission, Perquisites, Profits in lieu of or in addition to Salary or Wages
• Annual accretion to the balance of Recognized Provident Fund
• Leave Encashment
• Transferred balance in Recognized Provident Fund
• Contribution by Central Govt. or any other Employer to Employees Pension A/c as referred in Sec. 80CCD.

Income from House Property

i. Basis of Charge [Section 22]:

• Income from house property shall be Taxable the house property should consist of any building or land.

ii. The Gross Annual Value of the house property shall be higher of following:

• Expected rent
• Rent actually received or receivable after excluding unrealized rent but before deducting loss due to vacancy

iii. Deductions

Municipal Taxes

Standard Deduction [Section 24(a)]

30% of net annual value of the house property is allowed as deduction

Interest on Borrowed Capital [Section 24(b)]

Let-out property - Actual interest incurred on capital borrowed

Self-occupied property - Interest incurred on capital borrowed allowed as deduction upto Rs. 2 lakhs. The deduction shall be allowed acquisition or construction of house property is completed within 5 years.

Maximum loss set off allowed in a Financial Products year is limited upto Rs. 2 lakhs, remaining loss can be carried forward to future years, 8 years in total

Income from Capital Gains

Any Income derived from a Capital asset movable or immovable is Taxable under the head Capital Gains under Income Tax Act, 1961.
Short Term Capital Gains:

• Sold a Capital asset within 36 months and Shares or securities within 12 months of its purchase then the gain arising out of its sales after deducting there from the expenses of sale (Commission etc) and the cost of acquisition and improvement is treated as short term capital gain and is included in the income of the Taxpayer.

Taxability of short term capital gains:

• Section 111A of the Income Tax Act provides that those equity shares or equity oriented funds which have been sold in a stock exchange and securities transaction Tax is chargeable on such transaction of sale then the short term capital gain arising from such transaction will be chargeable to Tax @10% upto assessment year 2008-09 and 15% from assessment year 2009-10 onwards.

Long Term Capital Gain

• A Capital Asset held for more than 36 months and 12 months in case of shares or securities is a long term capital asset and the gain arising there from is a long term capital gain. Long term capital gains are arrived at after deducting from the net sale consideration of the long term capital asset the indexed cost of acquisition and the indexed cost of improvement of the asset.

Taxation of Long term capital gains

• The long term capital gains are Taxed @ 20% after the benefit of indexation as discussed above. No deduction is allowed from the long term capital gains from Section 80C to 80U. But in case of individual and HUF where the Income is below the basic exempted limit the shortage in basic exemption limit is adjusted against the long term capital gains.

Income from Profits and Gains of Business or Profession

Under Section 28, the following income is chargeable to Tax under the head "Profits and Gains of Business or Profession":

• Profits and Gains of any Business or Profession.
• Any compensation or other payments due to or received by any person specified in Section 28(ii).
• Income derived by a trade, professional or similar association from specific services performed for its members.
• The value of any benefit or perquisite, whether convertible into money or not, arising from Business or the exercise of a Profession.
• Any interest, salary, bonus, commission or remuneration received by a partner from firm .
• Fair market value of inventory as on the date on which it is converted into, or treated as, a capital asset determined in the prescribed manner.
• Income from speculative transaction.

Income from Other Sources

"Income From Other Sources" is any income which is not specifically Taxed under any other head of income will be

• Taxed under this head.
• Section 56(2)(i), Dividends
• Winnings from lotteries, crossword puzzles, races including horse races, card game and other game of any sort, gambling or betting of any form whatsoever, are always Taxed under this head.
• Interest Income
• Gifts received by an individual

Proof of Income

• Form 16 Copy – Part A & Part B
• Fixed Deposits
• Capital Gain Statement Share Broking
• FD Interest Certificate
• Invoice Copy
• Contract Copy

Proof of Deduction

• Life Insurance Premium
• Medical Insurance Premium
• School Fees Receipts
• House Property Tax
• Interest Certificate Housing Loan
• Tax Savings Documents
• Additional Deduction Documents