Income Tax is directly levied on the income of individuals, and the amount of tax charged depends on the level of income.
It is levied on the taxable income, i.e.Taxable Income = Total income – Applicable deductions and exemptions
The Income Tax Act has broken down the income into five different heads for the purpose of taxation: * Income from salary * Income from other sources (income from savings account, Fixed Deposits etc.) * Income from house property (rental income) * Income from capital gains (income from sale of capital assets like mutual funds, property etc.) * Income from business and profession (business profits and income of professionals like CAs, Doctors etc. having their own practice)