Factors needs to consider for computing taxable income

The following factors need to be taken into consideration for the computation of total income:

(i) Residential status: This will determine what kinds of income of an assessee are taxable in India. It is important to remember that residential status is different from citizenship, and that it has to be determined separately for every assessment year.

(ii) Heads of Income: There are five heads under which any income of an assessee is classified. They are:
• Income from Salaries
• Income from House Property
• Profits and Gains from Business or Profession
• Capital Gains
• Income from Other Sources
Within each head of income, certain deductions have been given. Income under each head is to be computed separately taking into account the specific provisions.

(iii) Deductions from total income: The Act allows certain deductions on account of certain payments like investments, insurance premia, school fees, etc. (These are loosely referred to as tax saving investments.) These are also to be considered for computing tax payable.

(iv) Apart from the above, it is important to take note of the following points:
• There are certain incomes which are totally exempt from tax. These are contained in section 10.
• An assessee may be assessable for certain other persons’ incomes, e.g minor child, spouse, etc.
• Some losses are eligible for being set off against income in subsequent years. You may take advantage of these provisions.

Related posts:

1. How to apply for a PAN card? Personal Account Number(PAN) is mandatory for all who are coming...
2. Home Loans and Income Tax benefits [caption id="attachment_149" align="alignleft" width="300" caption="Home Loans and Income Tax"][/caption] Intro...