Section ____ of the Income Tax Act, 1961 classifies income under ____ heads of income

The correct answer is 'Section 14 of the Income Tax Act, 1961 classifies income under five heads of income'

Key Points

• Section 14 of the Income Tax Act, 1961:
  • Section 14 of the Income Tax Act, 1961, is a crucial provision that classifies the types of income that are taxable in India into five distinct heads.
  • These five heads of income are:
    • Income from Salaries
    • Income from House Property
    • Profits and Gains of Business or Profession
    • Capital Gains
    • Income from Other Sources
  • Each head of income has its own set of rules, exemptions, and deductions, ensuring a comprehensive and systematic approach to calculating taxable income.
  • The classification helps in determining the nature of income and the relevant provisions for taxation under the Income Tax Act.

Additional Information

• Explanation of Other Options:
  • Option 1 (12, four):
    • This option is incorrect as the Income Tax Act does not classify income into four heads, nor is Section 12 relevant for such classification.
    • Section 12 of the Income Tax Act deals with "Income deemed to accrue or arise," which is unrelated to the classification of income heads.
  • Option 3 (15, five):
    • While the classification of income into five heads is correct, Section 15 does not deal with this classification. Instead, Section 15 pertains to the computation of "Income from Salaries."
    • Hence, this option is incorrect due to the mismatch in the section reference.
  • Option 4 (13, five):
    • Section 13 of the Income Tax Act primarily addresses the conditions under which income from trusts or charitable institutions is exempt or taxable.
    • It has no connection to the classification of income into five heads, making this option incorrect.
• Importance of Classification:
  • The classification of income into five heads ensures clarity and uniformity in the assessment of taxable income.
  • It aids taxpayers and authorities in identifying applicable rules, deductions, and exemptions for different types of income.
  • This systematic approach enhances efficiency in tax administration and compliance.