How to Calculate Total Income?
Total Income can be calculated by-
- Adding up earnings from all five heads of income
- Reducing from it allowable deductions under Section 80C to Section 80U of the Income Tax
The resultant amount is Total Income.
For 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 | xxx |
xxxx |
| Income by way of allowances | xx | ||
| Taxable value of perquisites | xx | ||
| Gross salary | |||
| Less: Deduction under Section 16 | xxx | ||
| Entertainment allowance | xxx | ||
| Professional tax | xxx | ||
| 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 | XXXX | ||
Total Income or Net income |
XXXX |
||
Why the calculation of Total Income (TI) important under the Income Tax Act?
A question might come up in your mind that why it is important to know total income?? The need to understand the concept of total income becomes vital because it directly impacts your tax payments. Tax is calculated on total income or net income of a person and not on Gross Total Income. If the computation of Total Income is made wrong i.e. either it is calculated higher than actual income or lower, following consequences shall follow
- In 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.
- The other side is even more distressing. Computing lower Total Income and resultantly paying lower income tax will be an open invite for tax notices, penalties & prosecution.
Frequently Asked Questions
Q- What is total income?
Ans. To know your total income sum up your annual income under 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 difference between gross income and total income?
Ans. Gross income is the aggregate income and a wider term from which total income can be arrived at after subtracting the decutionsunder section 80C to 80U of the income tax act.
Q- Is total income and taxable income different?
Ans. No, total income/net income and taxable income are one and the same thing.
Q- What is annual income?
Ans. Annual income means your income from all sources, it is same as Gross Total Income.
Q- What is the gross total income?
Ans. Aggregate income before deductions under chapter VIA is known as Gross Total Income.
Q- Is total income before or after tax?
Ans. When tax from gross income is deducted it results in total income. Hence, total income is always after tax.
Q- What is difference between total income and taxable income?
Ans. Total income and taxable income are interchangeable terms. There is no difference.
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