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Gross Total Income As Per Income Tax Act

Updated on: 04 Jun, 2024 02:37 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. However, income has been further classified and referred to by various names in the Indian Income Tax Act, such as

  • Exempt Income
  • Taxable Income
  • Total Income
  • Gross Total Income

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

What is Total Gross 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 categorized under these five heads,

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

How to Calculate Gross Total Income

Gross Total income is arrived at when your earnings from all these five heads of income are taken together. In other words, the aggregate of the incomes computed under the above 5 heads after setting off and carrying forward of losses and after applying clubbing provisions is known as Gross Total Income (GTI) under section 80B(5). Here’s the formula for calculating G.T.I. -

G.T.I. = Salary Income + House Property Income + Business/Profession Income + Capital Gains + Other Sources Income + Clubbed Income - Set off of Losses.

Components of Gross Total Income (GTI):

Gross Total Income (GTI) is the sum of all income earned before any deductions or exemptions are applied. Here's a list of the various components that contribute to GTI:

  • Income from Salary: This includes your regular wages, bonuses, commissions, and any allowances paid by your employer.
  • Income from House Property: If you own and rent out a property, the rental income you receive falls under this category.
  • Income from Business or Profession: Profits earned from running a business or practicing a profession are included in GTI.
  • Capital Gains: Profits made from selling capital assets like stocks, bonds, or real estate are considered capital gains and contribute to GTI.
  • Income from Other Sources: This is a broad category encompassing various income streams like interest accumulated on savings accounts, dividends income from investments, and income from freelancing gigs.
  • Clubbed Income (if applicable): In some cases, income earned by certain family members might be added to your GTI. This depends on specific tax laws.
  • Set-off of Losses (if applicable): Under certain circumstances, you might be able to deduct business losses or capital losses from your GTI.

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 an 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 is 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 a 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, jewelry, 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 that you have not reported or made a lower disclosure than 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.

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 ranges from section 80C to 80U. This means -

Income From Salary xx
Add: Income Under the Head House Property xx
Add: Profits and Gains of Business and Profession xx
Add: capital gains Income xx
Add: Income from Other Sources xx
Gross Total Income xxx
Less: Deductions under Section 80C to 80U xx
Total Income Xxx

Parameter Gross Income Total/ Net Income
Meaning Total income is calculated under all five income source heads after clubbing and setting off losses. The income amount is used to calculate an assessee’s tax payable.
Equals to The entire income earned in a financial year before claiming deductions under Chapter VI-A Deductions under Section 80 (80C to 80U)
Tax Treatment Tax is not levied Income tax is payable on this sum
Deductions made under Chapter VI-A of the 1961 Income Tax Act The income before deductions under ChapterVIA of the I-T Act of 1961 is referred to as gross total income. After deductions under Chapter VIA of the I-T Act of 1961, income is defined as total income.
Income Tax Obligation Gross Total Income is not used to determine income tax obligations. The total income is used to determine and/or assess the income tax obligation.

Although, you must have understood the difference between gross total income and total income, calculating all these amounts and filing your ITR can be quite a hassle and time-consuming at the same time. But don’t worry! Tax2win provides an innovative AI-integrated solution for your ITR filing needs. You can easily calculate your tax liability and file your ITR yourself. If you need assistance, you can also take an expert’s help. Book an eCA from Tax2win Now!

Frequently Asked Questions

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

The total annual income considered for EBC is INR 8 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 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?

The 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 on which tax is computed. It is arrived after deducting various deductions from gross total income.

Q- How to calculate adjusted gross total income for 80g?

To calculate your Adjusted Gross Total Income (AGTI) for claiming deductions under Section 80G in India:

  • Find your Gross Total Income (GTI) by adding all your income sources.
  • Identify deductions allowed (except 80G) like those under sections 80C to 80U, long-term capital gains, etc.
  • Subtract these deductions from your GTI to get your AGTI.

AGTI = GTI - (deductions excluding 80G)

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.