Source Of Income

Source of income refers to the specific origin or nature of the economic activity or asset that generates taxable income for an individual or entity — a classification framework used by the Indian Income Tax Act, 1961 to categorise all taxable receipts into five distinct heads of income for assessment and tax computation purposes. The five heads under which income is taxable in India are: Income from Salary (employment-related earnings including wages, allowances, and perquisites), Income from House Property (rental income from owned property and deemed rental on self-occupied properties), Profits and Gains of Business or Profession (income from self-employment, proprietorship, partnership, and professional practice), Capital Gains (profits from the transfer of capital assets including equity shares, mutual fund units, real estate, and gold), and Income from Other Sources (interest income, dividends above ₹10 lakh threshold from FY2021-22 onwards, gifts from non-relatives, and any income not covered under the four specific heads). For Indian taxpayers including investors, correctly identifying the source of each income item is critical for applying the correct tax rate and computing the eligible deductions — since tax rates, deduction rules, and set-off provisions differ significantly across heads. Capital gains, for instance, are taxed differently depending on the asset type and holding period, while salary income benefits from a standard deduction and HRA exemption not available to other income heads.