What is Total Income and How to Calculate It?
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.
|1. Income from salaries|
|Income from salary||xx|
|Income by way of allowances||xx|
|Taxable value of perquisites||xx|
|Less: Deduction under Section 16||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|
|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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