The Definition given u/s 2 (24) is inclusive and not exhaustive. According to English dictionary, the term “Income” means “ periodical monetary return coming in regularly from definite sources like one’s business, Land, Work, Investments etc.”.

It’s nowhere mentioned that “Income” refers to only monetary return. It includes value of Benefits and Perquisites.

The term “Income” includes not only what is received by using the property but also the amount saved by using it himself. Any thing which is convertible into income can be regarded as source of accrual of income.

“ Income includes “ :

• Profit and Gains : For instance, Profit generated by a businessman is taxable as “Income”.
• Dividend : For instance, “Dividend” declared/paid by a company to a shareholders is taxable as “ income” in the hands of shareholders .
• Voluntary contribution received by a Trust : In the hands of a Trust, income includes voluntary contributions received by it. This rule is applicable in the following cases..
• Such contribution is received by a trust created wholly or partly for charitable or religious purpose ; or
• Such contribution is received by a scientific research association ; or
• Such contribution is received by any fund or institution established for charitable purposes ; or
• Such contribution is received by any university or other educational institutions or hospital.

Example :

ABC Trust is created for public charitable purposes. On Dec, 15, 2008 it receives a sum of Rs.2 Lakh as voluntary contribution from a business house . Rs. 2 Lakh would be included in the income of the Trust.

• The value of any Perquisites or Profit in lieu of Salary taxable in the hand of employee.

Example :

Mr. You is employed by XYZ Ltd. Apart from Salary , he has been provided a Rent-Free House by the employer . the value of perquisites is respect of the Rent-Free House is taxable as “Income” in the hands of Mr. You..

• Any Special Allowance or Benefit : All type of special allowance are given/allow to the assessee to meet the expenses exclusively, wholly and necessarily for the duties he performed for the office or employment is treated as “Income”.

Example :

Mr. You is employed by XYZ Ltd. He gets Rs.5,000 per month as conveyance allowance other than Salary .Rs. 5,000 per month is treated as “ Income”.

• Value of any Benefit or Amenity, whether convertible into money or not.
• Any Capital Gain taxable u/s 45 is treated as “Income”

Example :

Mr. You owns a House Property. On its transfer, he generates a Capital Profit of Rs.1,20,000. it is treated as “Income” even if it is Capital Profit.

• Any winning from Lotteries (it included winning from prizes awarded) , Winning from Crossword Puzzles, winning from Races including Horse Race, winning from Card Games and other similar Games, winning from gambling or betting.

Example :

Mr. You wins a sum of .Rs. 50,000 from gambling. Rs.50,000 is treated as “ Income” of Mr. You.

• Any sum received by the assessee on account of his employer’s contributions to any Provident Fund, Superannuation Fund or any other Fund for the welfare of such employees in the business.
• Amount exceeding Rs.50,000 by way of Gift.

FEATURES OF “INCOME’

The following features of income can help a person to understand the concept of income.

(i) Definite Source : Income has been compared with a fruit of a tree or a crop from the field. Fruit comes from a tree and crop from fields. Thus the source of income is definite in both cases. The existence of a source for income is somewhat essential to bring a receipt under the charge of tax.

(ii) Income must come from Outside : No one can earn income from himself. There can be no income from transaction between head office and branch office. Contributions made by members for the mutual benefit and found surplus cannot be termed as income of such group.

(iii) Tainted Income : Income earned legally or illegally remains income and it will be taxed according to the provisions of the Act. Assessment of illegal income of a person does not grant him immunity from the applicability of the provisions of other Act. Any expenditure incurred to earn such illegal income is allowed to be deducted out of such income only.

(iv) Temporary or Permanent : Whether the income is permanent or temporary, it is immaterial from the tax point of view.

(v) Voluntary Receipt : The receipts which do not arise from the exercise of a profession or business or do not amount to remuneration and are made for reasons purely of personal nature are not included in the scope of total income.

(vi) Dispute regarding the Title : In case a person is receiving some income but his title to such receipts is disputed, it will not free him from tax liability. The receipt of such income has to pay tax.

(vii) Income in Money or Money’s worth :The income may be in Cash or in kind. It is taxable in both cases.

TAX TREATMENT OF “INCOME’

For the purposes of treatment of income for tax purposes it can be divided into 3 categories :

A. Taxable Income : These incomes form part of total income and are fully taxable. These are treated u/s 14 to 69 of the Act. These are Salaries, Rent, Business Profits, Professional Gain, Capital Gain, Interest, Dividend, Winning from Lotteries, Races etc.

B. Exempted Incomes : These incomes do not from part of total income either fully or partially . hence, No Tax is payable on such incomes. These incomes are given u/s 10(1) to 10(32) of the Act.

C. Rebateable ( Tax Free) Incomes :These incomes form part of total income and are fully taxable. Tax is calculated on total income out of which a Rebate of Tax at average Rate is allowed . The Rebateable incomes given u/s 86 of the Act are :

• Share of income received by a member of an association of persons provided the total income of such AOP is assessed to tax at the rates applicable to an individual.
• Share of income received by a partner of a firm assessed as an association of persons (PFAOP) provided the total income of such PFAOP is assessed to tax at the rates applicable to an individual.