Question

Distinguish between heads of income and source of income

Answer 1

Answer:

Explanation:

Heads of income are the ways to classify the income or profits earned by a person during a taxable year.

The five heads of income as follows -

Income from salaries

Income from house property

Profits And gains from business or profession

Capital Gains

Income from other sources

Sources of income are monetary sources from which income can be earned by an individual or a business

Sources of income for an individual maybe salary, Commission, interest etc.

Sources of income for a business maybe profits, return on Investments, grants from the government.

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Answer 2

Answer:

The ways to classify the income or profits earned by a person during a taxable year are known as heads of income. Salary, commission, interest, and other sources of income are examples of possible sources of income for an individual. Profits, returns on investments, and government grants are all possible sources of income for a company.

Explanation:

Heads of  Income:

Any basic and normal wage, annuity, pension, gratuity, leave encashment, and so on could be included. The total amount or gross salary is then charged under this income head of the Act after making a total aggregate of the total amount of income excluding the exemptions if any are present. Individuals and entities receive money, property, and other transfers of value as compensation for services, payment for products, returns on investments, pension distributions, gifts, and a variety of other transfers of value over a set period of time, which is referred to as "Heads of income."

• According to the Income Tax Act of $1961$, one's earnings are classified into five categories: salary, house property, business profit, investments/capital assets, and other sources of income.

• This classification can be derived from a variety of sources of income.
• The income sources, for example, are divided into five categories at the most detailed level: Wages and salaries, farm and non-farm self-employment income, government transfer payments, investment income, and other sources of income.

Source of Income:

The phrase "source of income" is not defined anywhere in the Income-tax Act, nor is it used to give it any special meaning. As a result, its straightforward dictionary definition should suffice.

• Money and property secured from any occupation, profession, or activity, from any contract, agreement, or settlement, from federal payments, court-ordered payments, from gifts, bequests, annuities, life insurance policies, and compensation for illness or injury are all examples of source of income.

• lawful financial resource or form of assistance that the recipient appropriately discloses and that can be verified and substantiated as derived from wages, investments, trusts, child support, spousal support, grant or loan program, or any federal, state, or local assistance payments, benefits, or subsidy programs, including but not limited to rent or housing vouchers, foster child assistance, public assistance, emergency rental assistance, veterans benefits, sociable security income, and other federal, state, or local assistance payments, benefits.