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Gross Total Income As Per Income Tax Act

Updated on: 30 Mar, 2022 04:09 PM

Tax in itself is a tedious phenomenon and the complexity increases when various terms are also added to the list. We all know that tax is levied upon income. But, income has been further classified and referred to by various names in India such as

  • Exempt Income
  • Taxable Income
  • Total income
  • Gross Total Income
  • Etc.

In this blogpost we will get you a detailed understanding upon Gross Total Income or GTI. What is the relevance of Gross Total Income? Why you should know about it? How it is calculated? The difference between GTI and TI (Total income) under the Income Tax Act in India and much more

What do you mean by Gross Total Income?

As the name suggests Gross Total Income is the aggregate of all the income earned by you during a specified period. According to Section 14 of the Income Tax Act 1961, the income of a person or an assessee can be categorised under these five heads,

  • Income from Salaries
  • Income from House Property
  • Profits and Gains of Business and Profession
  • Capital Gains
  • Income from Other Sources

And, Gross Total income is arrived at when your earnings from all these five heads of income is taken together.

Why Gross Total Income (GTI) needs to be calculated?

The computation of gross total income is vital because

  • It is the amount required to be disclosed while filing Income Tax Return
  • Deductions under Chapter VI A are required to be deducted from GTI to arrive at the taxable or total income

Gross Total Income shall not include:

While calculating gross total income one must sum up all of their income without reducing the amount for any tax saving investments made under Section 80C to 80U under Income Tax Act 1961.

What are the various additions required to be made in Gross Total Income?

Apart from adding earnings from all five heads of income following shall also be added to calculate your gross total income

  • Income to be added as per the clubbing provisions under the Income Tax Act
  • Adjustments for set off and carry forward of losses
  • Unexplained Tax Credit under section 68 of the Income Tax Act 1961, received whether in cash or credit. Which means receipt of any amount of which you do not have sufficient or valid explanation describing the source of receipt of such income. These categories of income are added to your Gross Total Income.
  • Unexplained Investments i.e. the investments which you have made but you are unable to give satisfactory explanation about the source or improper disclosures have been made on your part. In all these situations your investments will be termed as unexplained investments as per the purview of section 69 of the Income Tax Act. also, it shall be added to your Gross Total Income (GTI)
  • Assets and other money under Section 69A, valuables like money, jewellery etc for which no proper explanation is available with the assessee will be added to the Gross Total Income of the person.
  • Undisclosed or lower disclosed income is added to the Gross Total Income as per the provisions of Section 69B of the Income Tax Act 1961. This relates to all those income and assets which you have not reported or made a lower disclosure then the actual funds.
  • Unexplained expenditures under section 69C. In case you have made some expenses and no proper explanation regarding the same available then it would be added to your Gross Total Income and henceforth charged to taxes accordingly.
  • Hundi amount borrowed or repaid. In case you have borrowed or repaid some amount on Hundi then it shall be added to your Gross Total income or GI as per the provisions of section 69D of the income tax act.

Although we have obtained an understanding on the above income and assets or expenditures which are added to the gross total income. But, these additions or nature of additions are not generally witnessed in routine.

What is the difference between Gross Total Income and Total Income?

Gross Total Income is calculated foremost by adding your income under all five heads of income. Now, to arrive at the Total income you must subtract from it the deductions under chapter VI A of the Income Tax Act 1961. I.e the deduction ranging form section 80C to 80U . Which means

Income From Salaryxx
Add: Income Under the Head House Propertyxx
Add: Profits and Gains of Business and Professionxx
Add: capital gains Incomexx
Add: Income from Other Sourcesxx
Gross Total Incomexxx
Less: Deductions under Section 80C to 80Uxx
Total Incomexxx

Frequently Asked Questions

Q- Which income is considered for obtaining Ebc total net or gross?

The total annual income considered for EBC is INR 1 lakh(gross).

Q- How many heads of income are there to compute the gross total income?

There are five heads of income to compute the gross total income, namely, Income from salaries, Income from house property, profits and gains of business or profession, income from capital gains and income from other sources.

Q- How do the gross total income and the taxable income differ from each other?

Gross total income refers to the total of income computed under the five heads of income. Taxable income is obtained after deducting various deductions under chapter VI A from gross total income.

Q- Is a surcharge calculated on total income or on taxable income?

Surcharge is neither calculated on total income nor on taxable income. It is calculated on income tax computed on the taxable income as per rates applicable to the assessee.

Q- Which income should be considered either gross income or net payable income to calculate annual income?

Annual income is the net taxable income in which tax is computed. It is arrived after deducting various deductions from gross total income.

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CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.