If you are a taxpayer and are contemplating filing your income tax return (ITR) for FY2024-25, then it is vital to note that your tax return includes any or all of the five sources of income.
Broadly, these five income streams include salary, rental income from property, gains on the sale of assets such as gold, securities and property, profit from a business enterprise, and all other sources such as interest on fixed deposit.
Notably, a taxpayer may earn income from one or more of these sources. For instance, someone with a salary and rental income may also have a small business from which they earn a profit. Or someone who runs a business may be drawing a salary from their business unit. Likewise, someone with a business, rental income as well as interest income may also have earned some capital gain by selling a property or gold.
“Although it is not a common occurrence, there could be some cases where a taxpayer has income under all five heads. In that case, one will have to use ITR-3 or ITR-4 based on the finer details of the case,” says CA Pratibha Goyal, a Delhi-based chartered accountant and partner, PD Gupta & Company.
Here, we give a lowdown on these five streams of income:
Five heads of income include:
I. Salary: This category includes basic salary, allowances, perquisites, and bonuses, among others. Typically, taxpayers who only have a salary as their income can file their income tax return with ITR-1.
II. Income from house property: Includes rental income from owned property. Those who have income from house property can use ITR-1 to file their income tax return.
III. Capital gains: Capital gains could be short term or long term and could accrue on the sale of shares, mutual funds and real estate.
Taxpayers whose capital gains are less than ₹1.25 lakh can use ITR-1 for filing their tax return and if it is higher, one can use ITR-2 for filing their return.
IV. Business or profession: This includes self-employment, freelancing and business income. It applies to entrepreneurs, freelancers and small agency owners.
Those earning under a business or profession need to file their tax return under ITR-4 or ITR-5 or ITR-6 based on the category of business income.
V. Other sources: This category includes interest income, dividends from shares, lottery winnings, and gifts. For instance, if you happen to win a bounty from CoinDCX or a TV show such as Big Boss, the earnings will fall under other sources.
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