Section 14: Five Heads of Income Under the Income-tax Act

Section 14 of the Income-tax Act, 1961 classifies income under five heads for charging income tax and computing total income, unless the Act provides otherwise. Identifying the correct head matters because each has its own rules for taxable amounts, deductions, exemptions and losses.

Meaning and scope of Section 14

Section 14 states that, save as otherwise provided by the Act, all income is classified under specified heads for the purposes of the charge of income tax and computation of total income. The five heads are Salaries, Income from house property, Profits and gains of business or profession, Capital gains, and Income from other sources. These categories help determine the correct computation provisions; they are not five separate tax returns.

The five heads of income

1. Income from salaries

Section 15 generally governs when salary is chargeable, including salary due, paid in advance or arrears where not previously taxed. Section 17 defines salary, perquisites and profits in lieu of salary. Section 16 provides applicable deductions, including the standard deduction where available under the relevant regime and year.

Example: Monthly wages paid by an employer to an employee generally fall under Salaries. Fees earned by a genuinely independent consultant ordinarily require examination under the business or professional income head instead; the contractual label alone is not conclusive.

2. Income from house property

Section 22 generally charges the annual value of buildings or lands appurtenant thereto owned by the taxpayer, other than property occupied for the taxpayer's own business or profession whose profits are chargeable to tax. Section 23 sets out annual-value rules, including those applicable to self-occupied and let-out property. Section 24 covers specified deductions, including qualifying interest and the statutory deduction where applicable.

Example: Rent from an apartment owned and let out by an individual is generally considered under Income from house property. Special rules may apply where letting is inseparable from other commercial services or forms part of a business activity.

3. Profits and gains of business or profession

This head generally covers taxable profits from trade, manufacturing, services, self-employment and professions. Section 28 identifies chargeable business and professional income; Sections 29 onward prescribe computation, permissible expenditure and disallowances. Provisions on depreciation, books, tax audit and presumptive taxation may apply depending on the taxpayer and activity.

Example: Profits earned by a retailer from selling goods, or by a self-employed architect from professional assignments, will ordinarily be examined under this head.

4. Capital gains

Section 45 is the principal charging provision for capital gains arising on transfer of a capital asset, subject to exceptions and special provisions. The nature of the asset, period of holding, cost, exemptions and applicable tax rates affect the calculation. Not every receipt from selling property is a capital gain: assets held as trading stock may instead generate business income.

Example: Profit on the taxable transfer of a long-term investment may fall under Capital gains, whereas profit from a dealer's stock-in-trade generally falls under business income.

5. Income from other sources

Section 56 generally operates as a residual charging provision for taxable income not chargeable under the other four heads, subject to the Act's specific rules. Examples may include bank interest, taxable dividends and specified gifts or receipts. Sections 57 and 58 address permitted deductions and disallowances for this head.

Example: Interest on a personal fixed deposit will commonly fall under Income from other sources, although interest arising as part of a business may need different treatment on its facts.

How to choose the correct income head

1. Identify the receipt and its legal character: salary, rent, professional fee, asset transfer proceeds, interest or another receipt.
2. Check the specific charging section: apply the relevant statutory tests before using the residual head.
3. Determine applicable deductions and exemptions: these differ across heads and tax regimes.
4. Review special rules: deeming provisions, clubbing, loss set-off, tax treaties and special rates may change the result.
5. Apply the correct tax year: statutory amendments and the transition to the 2025 Act matter.

Why the old text shows an omitted head B

The historical lettering in Section 14 runs from A to C, D, E and F because the former head B - Interest on securities was omitted with effect from 1 April 1989. That omission did not make interest on securities automatically tax-free; taxable interest is classified under the appropriate surviving head depending on the facts and statutory provisions. The original webpage's statutory excerpt and legislative note are retained below.

Official legal and tax resources

• Income Tax Department - Income-tax Act, 1961 (legislation and amendments).
• Income Tax Department e-Filing Portal (returns, forms and official guidance).
• India Code (central statutes, including the Income-tax Act, 2025).

Frequently asked questions

How many heads of income are there under Section 14?

There are five: Salaries, Income from house property, Profits and gains of business or profession, Capital gains, and Income from other sources.

Is interest on securities a separate head of income?

No. The former separate head was omitted with effect from 1 April 1989. Taxable interest is classified under an applicable remaining head.

Can a taxpayer have income under more than one head?

Yes. For example, one individual may receive salary, house-property income, capital gains and bank interest in the same year. Each is computed under the applicable provisions before determining total income.