The word Income has a very broad and comprehensive meaning. In case of a salaried person, all that is received from an employer in cash, kind or as other facility is considered as income. For a businessman, his net profits will constitute income. Income may also flow from investments in the form of Interest, Dividend, and Commission etc. The 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 5 different heads, which are:
Income from Salary
Income from House property
Income from Business or Profession
Income from Capital Gains
Income from Other Sources
Gifts exceeding Rs 25,000 is taxable unless it is received from
any person who is a relative or
on occasion of marriage or
under will or by inheritance or
in contemplation of death of the payer
Individuals, Hindu Undivided Family, Association of Persons, 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 case of senior citizens (aged above 65 years), the exempted limit for the financial year 2007-08 is Rs. One Lakh Ninety Thousand and for women the limit is One Lakh Forty Thousand.
