Section 13 Income Tax Act 2025: What Are the Five Heads of Income?

Section 13 of the Income-tax Act, 2025 classifies income under five statutory heads for charging income-tax and computing total income. The correct head determines which computation provisions apply.

Updated: 10 November 2026 | Chapter IV, Part A: Heads of income

Current law: The Income-tax Act, 2025 came into force on 1 April 2026. Section 13 corresponds broadly to Section 14 of the Income-tax Act, 1961. Section 13 itself classifies income; it does not prescribe tax rates or create a separate exemption.
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What does Section 13 provide?

Subject to other provisions of the Act, income is classified into five heads for the purposes of charging income-tax and computing total income: (a) Salaries; (b) Income from house property; (c) Profits and gains of business or profession; (d) Capital gains; and (e) Income from other sources.

The opening words, "Save as otherwise provided in this Act", make the classification subject to specific provisions elsewhere in the legislation. The legal character of a receipt, not merely the name used in accounts, is relevant to identifying its head.

What are the five heads of income under Section 13?

1. Salaries

Income arising from an employer-employee relationship is generally considered under the head "Salaries". The relevant rules include Section 15 and the connected provisions on salary, perquisites, profits in lieu of salary and deductions. Salary, bonus and taxable employment benefits are common examples.

2. Income from house property

This head deals with income computed in respect of buildings or lands appurtenant thereto, subject to the statutory rules and exceptions. Sections 20 to 25 address the charging and computation framework, including annual value and permissible deductions. A rented residential property may fall under this head; the applicable treatment depends on the facts and the Act.

3. Profits and gains of business or profession

Income from carrying on a business or profession is ordinarily considered under this head. Sections 26 onward contain relevant provisions for computation, subject to allowable expenses, restrictions and special rules. Examples include trading profits and professional fees earned in an independent practice.

4. Capital gains

Capital gains generally arise where the Act treats gains from a transfer of a capital asset as chargeable under this head. The statutory definitions, charging rules, exemptions and computation provisions must be applied to the particular transaction. A gain on sale of an investment property is a common illustration, subject to applicable exclusions and special rules.

5. Income from other sources

This is generally the residual head for taxable income not appropriately chargeable under another specified head, subject to the relevant provisions. Section 92 addresses income from other sources. Certain interest receipts and other specified receipts may fall here, depending on their nature and the applicable statutory rules.

Why is correct classification important?

  • Computation: each head has its own charging, deduction and valuation rules.
  • Losses: set-off and carry-forward restrictions can depend on the head and type of loss.
  • Exemptions: exclusions from total income and special provisions must be considered before arriving at taxable total income.
  • Compliance: classification affects the disclosures and schedules relevant to the tax return.
Important: The same receipt cannot simply be placed under whichever head yields the lowest tax. Determine its nature and apply the specific charging provisions first. Some income may be governed by special rules notwithstanding the general five-head classification.

Relevant statutory concepts

Tax year: The period defined in Section 3 of the Income-tax Act, 2025 for which income is assessed under the new framework.
Total income: The amount arrived at after applying the relevant charging, inclusion, exclusion, computation and other provisions of the Act; see the statutory definition in Section 2 and related provisions.
Capital asset and transfer: Statutory concepts that help determine whether a transaction is subject to capital-gains provisions; consult the definitions and applicable capital-gains chapter.
Business and profession: Terms addressed by the Act's definition provisions; classification depends on the actual activity and specific charging provisions.

Illustrative classification of receipts

ReceiptPossible head
Monthly employment salarySalaries
Rent from an owned residential buildingIncome from house property, subject to exceptions
Independent consultancy feesProfits and gains of business or profession
Taxable gain on sale of investment sharesCapital gains, if held as capital assets
Personal savings-account interestGenerally income from other sources

Examples are illustrative; actual treatment depends on the facts and relevant statutory provisions.

Frequently asked questions

Does Section 13 itself impose tax?

No. Section 13 sets out the five heads for classification. Taxability follows the charging and other applicable provisions of the Act.

Is exempt income one of the five heads?

No. Exempt income is dealt with under applicable exclusion provisions, including Section 11 and its Schedules. Exemption is not a sixth head of income.

Which provision of the 1961 Act corresponds to Section 13 of the 2025 Act?

Section 14 of the Income-tax Act, 1961 dealt with the five heads of income.

Can interest income ever be business income?

Depending on the nature of the activity and the relevant provisions, interest may be assessed as business income rather than under the residual head. The facts must be examined.

Official legal references

Official Income-tax Act, 2025 (amended 2026)Income Tax Department resources

Legal information for general reference. For filing or litigation, consult the enacted text, amendments, rules and applicable judicial decisions.