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What is Total Income and How to Calculate It?

Updated on: 16 Jan, 2024 05:49 PM

Total Income (TI) or Gross Total Income (GTI) are the terms used interchangeably but differ in substance. While Gross Total Income is the income arrived at by adding the income from all 5 sources and before providing the deductions under chapter VIA , total income is arrived at after providing the deductions under Chapter VIA from the gross total income. In other words, GTI is a broader concept and total income is a sub-section of GTI that can be calculated by claiming the deductions under chapter VIA.

How to Calculate Total Income?

Total Income can be calculated by -

  • Adding up earnings from all five heads of income
  • Subtracting the allowable deductions under chapter VIA of the Income Tax from the GTI.

The resultant amount is Total Income.

For a better understanding, find below the tabular presentation of how to compute total income.

Particulars Amount
Rs Rs Rs
1. Income from salaries
Income from salary xx
Income by way of allowances xx
Taxable value of perquisites xx
Gross salary
Less: Deduction under Section 16 xx
Entertainment allowance xx
Professional tax xx
INCOME TAXABLE UNDER THE HEAD SALARIES
2. Income from House Property
Adjusted net annual value xx xxxx
Less: Deduction under section 24 xx
INCOME TAXABLE UNDER THE HEAD HOUSE PROPERTY
3. Income from Business or Profession
Net profit as per profit and loss account xx xxxx
Add: Amounts which are debited to P&l a/c but are not allowed as a deduction under the act xx
Less: Expenditure which are not debited to P&L a/c but are allowed as a deduction under the act xx
Less: Income which are credited to P&L a/c but are exempt under section 10 xx
Add: Income which are not credited to P&L a/c but are taxable under this head xx
PROFIT & GAINS TAXABLE UNDER THE HEAD BUSINESS & PROFESSION
4. Income from Capital Gains
Amount of capital gains xx xxxx
Less: Amount exempt under sections 54, 54B,54D,54EC,54F, 54G, 54GA, 54GB, and 54H xx
INCOME TAXABLE UNDER THE HEAD CAPITAL GAINS
5. Income from other sources
Gross income xx xxxx
Less: Deduction under section 57 xx
INCOME TAXABLE UNDER THE HEAD OTHER SOURCES
Total [i.e., (1) +(2) +(3) +(4) +(5)] XXX
Less: Adjustment on account of set-off and carry forward of losses XXX
Gross total income XXXX
Less: Deductions u/s 80C to 80U XXXX
Total Income or Net income XXXX

Why the calculation of Total Income (TI) important under the Income Tax Act?

You must be thinking why is it important to know total income?? The concept of total income becomes vital because it directly impacts your tax payments. Tax is calculated on the total income or net income of a person and not on Gross Total Income. If the computation of Total Income is wrong, i.e., either it is higher or lower than actual income, the following consequences shall follow

  • If case TI has been calculated more than the actual amount, then the tax would be calculated on such increased amount, and you might end up paying higher taxes unnecessarily.
  • On the other hand, computing lower Total Income and resultantly paying lower income tax is like an invitation for tax notices, penalties & prosecution.

Therefore, it is important to calculate the total income correctly to avoid the consequences of underpaying or overpaying.


Difference Between Gross Income & Total Income

Basis Gross Total Income (GTI) Total Income (TI)
Meaning Gross total income is the total income earned by an individual or organization before deductions. It includes income from sources like salary, capital gains, business profits, house property and other sources. Total income is the taxpayer’s income that remains after taking into account all the permissible deductions under the income tax act. It is calculated by subtracting GTI - deductions.
Taxation Tax is not calculated on gross total income. However, GTI acts as the starting point for tax calculation. Tax is calculated directly on the Total Income (TI).
Components It includes all types of income like income from salary, house property, capital gains, business/profession, and other sources. Total Income is calculated by subtracting the permissible deductions and exemptions from the GTI
Purpose. It provides a holistic view of the income of individuals or organizations. It provides clarity about the taxation of an individual’s or organization’s taxable income.

Frequently Asked Questions

Q- What is total income?

To know your total income add up your annual income from all the five heads of income and account for the deductions under chapter VIA. The net result would be your total or net income.


Q- What is the difference between gross income and total income?

Gross income is the aggregate income and a wider term from which total income can be arrived at after subtracting the deduction under chapter VIA of the income tax act.


Q- Is total income and taxable income different?

No, total income/net income and taxable income are one and the same thing.


Q- What is annual income?

Annual income means your income from all sources, it is the same as Gross Total Income.


Q- What is the gross total income?

Aggregate income before deductions under chapter VIA is known as Gross Total Income.


Q- Is total income before or after tax?

When deductions from gross income are deducted it results in total income. Hence, total income is always beforetax.


Q- What is the difference between total income and taxable income?

Total income and taxable income are interchangeable terms. There is no difference.


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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.in. 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.