The five heads of income and how total income is built
1 min read
Updated 03 Oct 2026
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AI summary
Salary, house property, business, capital gains and other sources, and the path from gross income to tax payable.
3 sections 7 steps
The five heads
| Head | Examples |
|---|---|
| Salaries | Salary, allowances, perquisites, pension |
| Income from house property | Rent, deemed rent on a second house |
| Profits and gains of business or profession | Trading, manufacturing, consultancy, freelancing |
| Capital gains | Sale of shares, mutual funds, property, gold |
| Income from other sources | Interest, dividends, gifts above limits, family pension |
From income to tax
- Work out income under each head.
- Set off losses within and across heads (house property loss is capped at ₹2 lakh against other heads).
- The result is gross total income.
- Subtract eligible deductions (mostly old regime only) to get total income.
- Apply slab rates, plus special rates for capital gains, lottery etc.
- Subtract rebate, add surcharge and 4% cess.
- Subtract TDS, TCS and advance tax paid. The balance is payable, or refundable.
Losses carried forward
- Business loss: up to 8 years, only against business income.
- Speculation loss: 4 years, only against speculation income.
- Capital loss: 8 years. Long-term loss only against long-term gains.
- House property loss: 8 years, only against house property income.
- The return must be filed by the due date to carry forward most losses.
Sources
PreviousResidential status: resident, RNOR and non-resident Next in Income Tax Basics Income from other sources: interest, dividends, gifts and winnings
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