Total Income (TI): Gross Total Income (GTI) or Total Income (TI) are the terms practised correspondently but vary in substance. Whereby summing up incomes earned as per all five sources of income, the Gross Total Income is calculated. As per under Section 80C to 80U (namely, Chapter VI A deductions) under the Income Tax Act 1961, after subtracting the deductions from Gross Total Income, the Total income is entered. This signifies GTI is a significant element out of which, on subtracting a certain specified amount, we can come at the TI.
- What is Total Income?
- How to Calculate Total Income?
- What is the importance of the Total Income (TI) calculation under the Income Tax Act
- Frequently Asked Questions
What is Total Income?
Net Income or Total Income is the amount left from an individual’s gross income after procuring out all deductions permitted under the ITA.
It is the taxable part of your income; your tax liability depends on this amount.
The Total Income is defined by Section 2(45) of the ITA, and the scope is established by Section 5.
- For Indian residents: Any interest accrued, income received, and also required to obtain (deemed payment)
- For Indians who are not ordinarily resident: Incomes generated through businesses controlled in foreign countries or operated from India.
- For Indians who are non-resident (NRI): Only those earnings accruing or arising in India.
Benefits in Income Tax for Senior Citizens can be found here.
Under Section 2(45), the Total Income is defined with the scope which has been defined by Section 5 of the Income Tax Act, 1961
- If one is an Indian resident in the previous year, any income received, deemed, or accrued to be received by that individual will be accounted for
- If one is are not ordinarily resident in the previous year, incomes originating out of India will be added only if they are from a business performed or controlled in India.
- In the matter of non-residents (NRI), only incomes accruing or arising in India will be included.
- Total Income is reached by subtracting all qualified deductions from “Total Income.”
The tax liability of any individual will be estimated on the Total Income. In simple terms, one pays tax on their Total Income.
How to Calculate Total Income?
Total Income can be determined by-
- Summing up incomes from all five sources of income
- Under Section 80C to Section 80U of the Income Tax, reducing from it permissible deductions
The resultant sum is Total Income.
For better understanding, the tabular presentation explains how to compute total income.
Income from Salaries
- Income from salary
- Income by way of allowances
- The taxable value of perquisites
- Gross salary
- Less: under Section 16, all the Deduction
- Allowance for Entertainment
- Professional Tax
- UNDER THE HEAD SALARIES: The Taxable Income
Income from House Property
- The adjusted net annual value
- Less: Deduction under section 24
- UNDER THE HEAD HOUSE PROPERTY: The Taxable Income
Income from Profession or Business
- As per profit and loss account: Net profit
- Add: Amounts that are debited to P&l a/c but are not allowed as a deduction under the act
- Less: Expenditure which is not debited to P&L a/c but is allowed as a deduction under the act
- Less: Income which is credited to P&L a/c but is exempt under section 10
- Add: Income which is not credited to P&L a/c but is taxable under this head
- PROFIT & GAINS TAXABLE UNDER THE HEAD BUSINESS & PROFESSION
Income from Capital Gains
- Amount of capital gains
- Less: Amount exempt under sections 54, 54B,54D,54EC,54F, 54G, 54GA, 54GB, and 54H
- INCOME TAXABLE UNDER THE HEAD CAPITAL GAINS
Income from other sources
- Gross income
- Less: Deduction under section 57
- INCOME TAXABLE UNDER THE HEAD OTHER SOURCES
- Total [i.e., (1) +(2) +(3) +(4) +(5)]
- Less: Adjustment on account of set-off and carry forward of losses
- Gross total income
- Less: Deductions
- Total Income or Net income
What is the Importance of Total Income (TI) Calculation under the Income Tax Act?
An inquiry might come up in a person’s mind why it is necessary to comprehend total income?? The necessity to understand the concept of total income becomes important because it directly impacts the tax payments of any person. Tax is calculated on an individual’s net income or total income and not on Gross Total Income. If the estimate of Total Income is made incorrect, i.e. either it is calculated lower than actual income or higher, the resulting consequences shall follow.
- In circumstance, Total Income has been determined more than the actual amount. Then the tax would be assessed on such an increased amount, and one might end up spending higher taxes unnecessarily.
- The other faction is even further distressing. Computing Total Income that is lower and resultantly spending lower income tax will be an open invite for tax notices, prosecution and penalties.
FAQ’s on Gross Total Income
What is the difference between total income and gross income?
As defined under sections 80C to 80U of the income tax act, Gross income is a broader term from which total income can be arrived at after subtracting the deductions and the aggregate income.
Is taxable income and total income different?
No, net income/total income and taxable incomes are one and the same thing.
What is the definition of annual income?
Annual income means the income from all sources of an individual, and it is the corresponding as for Gross Total Income.
What is the difference between taxable income and total income?
Taxable income and Total income are terms that are interchangeable. Basically, there is no difference.
What does total income mean?
Individuals need to sum up their annual income under all the five heads of income and account for the reductions under chapter VIA to know their total income. The net outcome would be their net or total income.
What does the total gross income mean?
Under chapter VIA, Aggregate income before deductions is known as Gross Total Income.
Is total income after-tax or before?
When the deduction tax is made from gross income, the resultant amount is total income. Hence, total income is eternally after tax.