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HOW TO CALUCLATE TOTAL INCOME UNDER INCOME TAX LAW


The taxes on income can be finalized only on the completion of the previous year. However, to enable a regular flow of funds and for easing the process of collection of taxes, Income-tax Act has provisions for payment of taxes in advance during the year of earning itself or before completion of previous year. It is also known as Pay as your earn concept. Taxes are collected by the Government through the following means:

  1. Voluntary payment by taxpayers into various designated Banks such as Advance tax, Self-Assessment tax, etc.

  2. Taxes deducted at source

  3. Taxes collected at source ​​

  4. Equalisation Levy​ ​​


S​ection 14​ of the Income-tax Act has classified the income of a taxpayer under five different heads of income, viz.:

  • Salaries

  • Income from house property

  • Profits and gains of business or profession

  • Capital gains

  • Income from other sources​​

What is gross total income ? ​​


Total income of a taxpayer from all the heads of income is referred to as Gross Total Income.


What is the difference between gross total income and total income?​ Total Income is the income on which tax liability is determined. It is necessary to compute total income to ascertain tax liability. secti​on 80C to 80U p​rovides certain deductions which can be claimed from Gross Total Income (GTI). After claiming these deductions from GTI, the income remaining is called as Total Income. In other words, GTI less Deductions (under secti​on 80C to 80U) = Total Income (TI). Total income can also be understood as taxable income. Following table gives a better understanding of the difference between GTI and TI :

Computation of gross total income and Taxable Income

Particulars

Amount

Income from salary

xxxxx

Income from house property

xxxxx

Profits and gains of business or profession

xxxxx

Capital gains

​xxxxx

Income from other sources

​xxxxx

Gross Total Income

xxxxx

Less : Deductions under Chapter VI-A (i.e. under section 80C to 80U)

xxxxx

Total Income (i.e., taxable income)

xxxxx

Note : Inter source losses, inter head losses, brought forward losses, unabsorbed depreciation, etc., (if any) will have to be adjusted (as per the Income-tax Law) while computing the gross total income.

Note: If the eligible assessee has opted for concessional tax regime under section 115BAA, 115BAB, 115BAC and 115BAD, the total income of assessee is computed without claiming specified exemptions or deductions:


Rounding off Total Income

As per section 288A​​, total income computed in accordance with the provisions of the Income-tax Law, shall be rounded off to the nearest multiple of ten. Following points should be kept in mind while rounding off the total income:

  • First any part of rupee consisting of any paisa should be ignored.

After ignoring paisa, if such amount is not in multiples of ten, and last figure in that amount is five or more, the amount shall be increased to the next higher amount which is in multiple of ten and if the last figure is less than five, the amount shall be reduced to the next lower amount which is in multiple of ten and the amount so rounded off shall be deemed to be the total income of the taxpayer.​


Illustration for better understanding

If the taxable income of Mr. Keshav is Rs. 2,52,844.99, then first paisa shall be ignored, i.e., 0.99 paisa shall be ignored) and the remaining amount of Rs. 2,52,844 shall be rounded off to Rs. 2,52,840 (since last figure is less than five). If the total income is Rs. 2,52,845 or Rs. 2,52,846.01, then it shall be rounded off to Rs. 2,52,850 (since the last figure is five or above).​



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