Chapter III - Incomes Which Do Not Form Part of Total Income
Section 13
Section 13: the five heads of income
Section 13 is short but foundational - it lays down the five categories, or "heads," under which every rupee of a taxpayer's income must be classified before tax can be computed. Nearly every other computation provision in the Act (Chapter IV onward) is organised around one of these five heads.
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Need advice on Section 13?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
Save as otherwise provided in this Act, all incomes shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of 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.
Introduction
The income head is the first organising decision in a tax computation. It points to the charging and deduction rules to use; the closing words preserve special rules elsewhere in the Act.
Key takeaways
Five income heads
Taxable income is classified as salaries, house property, business or profession, capital gains, or other sources for charging tax and computing total income.
Subject to specific provisions
The five-head classification applies unless another provision of the Act directs otherwise.
What the section says
"Save as otherwise provided in this Act, all incomes shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of income."
- Salaries
- Income from house property
- Profits and gains of business or profession
- Capital gains
- Income from other sources
Why this classification matters
Each head has its own computation rules, its own allowable deductions, and in some cases its own rate of tax (for example, capital gains are frequently taxed at special rates rather than the normal slab rates). Which head a particular receipt falls under can materially change how much tax is payable on it - the same amount of money can be taxed very differently depending on whether it's classified as, say, business income or capital gains.
Section 13 itself doesn't define or compute anything - it simply sets up the five-way classification that Chapter IV (Computation of Total Income) then works through head by head: Salaries (Sections 15-19), Income from House Property (Sections 20-25), Profits and Gains of Business or Profession (Sections 26-65), Capital Gains (Sections 67-91), and Income from Other Sources (Sections 92-95).
"Income from Other Sources" functions as the residual head - income that doesn't fit any of the first four heads is taxed under this one, so in principle every kind of taxable receipt has a head it belongs to.
A classification sequence
For each receipt, record its source and legal character, then test the potentially applicable specific head before using 'Income from other sources'.
Once classified, compute it under that head's provisions and consider any specific exclusion or override elsewhere in the Act.
Step-by-step flow for classifying income under Section 13
- 1
Does a specific provision of the Act deal with this income differently?
Section 13 applies "save as otherwise provided in this Act". Check for a special rule first.
- 2
Is it income under the head "Salaries" or "Income from house property"?
- Yes: Classify it under that head.
- No: Go to the next step.
- 3
Is it "Profits and gains of business or profession" or "Capital gains"?
- Yes: Classify it under that head.
- No: Go to the next step.
- 4
Residual head
Income not falling under the first four heads is classified as "Income from other sources". Each head is then computed under its own provisions before total income is arrived at.
Practical checklist
Do
- Maintain a receipt-by-receipt schedule identifying the selected head and why it applies.
- Recheck the classification when a receipt could fall under more than one head.
Avoid
- Do not use 'Income from other sources' simply because the correct specific head is uncertain.
Illustrative example
Worked example: sorting one person's receipts into heads
Hypothetical facts (illustration only, not a real taxpayer): During a tax year Ms. Kapoor (i) draws a salary from her employer, (ii) receives rent from a flat she owns, (iii) earns fees from freelance consulting work, (iv) sells shares held as a long-term investment, and (v) earns interest on a savings bank account.
Salary
Classified under "Salaries" (clause (a)).
Rent from her flat
Classified under "Income from house property" (clause (b)).
Consulting fees
Classified under "Profits and gains of business or profession" (clause (c)).
Gain on sale of investment shares
Classified under "Capital gains" (clause (d)).
Savings bank interest
Not salary, rent, business income or capital gain on these facts, so it falls in "Income from other sources" (clause (e)).
Outcome
- Each item is computed under the rules of its own head, and the results are combined into total income.
- Classification depends on facts: for example, shares held as stock-in-trade by a dealer would fall under the business head instead.
Glossary
- Head of income
- One of the five statutory categories under which an amount is classified for charging and computation.
Frequently asked questions
What are the five heads of income under the Income-tax Act, 2025?
Salaries; Income from house property; Profits and gains of business or profession; Capital gains; and Income from other sources.
Why does it matter which head my income falls under?
Each head has its own rules for computing taxable income, its own allowable deductions, and sometimes its own tax rate - the same receipt can be taxed very differently depending on which head it's classified under.
What happens to income that doesn't fit any of the first four heads?
It falls under "Income from other sources," the residual head, which is designed to capture any taxable income not covered elsewhere.
Need help applying this provision to your situation?
Get help classifying and filing your income correctlyLast updated 9 October 2026