Gross Total income, Total income

As per section 14, all income shall, for purposes of Income-tax and computation of total income, be classified under the following heads of income:

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

Aggregate of incomes computed under the above 5 heads, after applying clubbing provisions and making adjustments of set off and carry forward of losses, is known as Gross Total Income (GTI). [Section 80B(5)]

T. I. = Salary Income + House Property Income + Business or Profession Income + Capital Gains + Other Sources Income + Clubbing of Income – Set-off of Losses

Rounding off of Total Income [Section 288A]:

The total income, as computed above, shall be rounded off to the nearest multiple of ten rupees and for this purpose any part of a rupee consisting of paise shall be ignored. Thereafter if such amount is not a multiple of ten, then, if the last figure is 5 or more, the amount shall be increased to the next higher multiple of 10 and if the last figure of Total Income is less than 5, the amount shall be reduced to the next lower multiple of 10. For example, if the total income is Rs. 8,79,467, it shall be rounded off to Rs.8,79,470 and if it is Rs.8,79,464.90, it shall be rounded off to Rs.8,79,460.

How to compute tax liability on Total Income:

On the Total Income, tax is calculated according to the normal rates prescribed under the relevant Finance Act and special rates prescribed in the Income Tax Act.

The amount so computed, shall be increased by a surcharge, if applicable and education cess calculated @ 2% + SHEC @ 1% of (tax + surcharge if any). The amount so arrived at is the tax liability of the person for that year. W.e.f. A.Y. 2010-11, the surcharge was applicable only in case of a company assessee. However, w.e.f. A.Y. 2014-15 surcharge has been made applicable to all assessee provided the total income of the assessee exceeds the specified amount.

Rounding off of tax, etc. [Section 288B]:

The amount of tax (including tax deductible at source or payable in advance), interest, penalty, fine or any other sum payable, and the amount of refund due, under the provisions of the Income-tax Act, shall be rounded off to the nearest multiple of ten rupees and, for this purpose, where such amount contains a part of ten rupees then, if such part is five rupees or more, it shall be increased to ten rupees and if such part is less than five rupees it shall be ignored.

Total Income

The ‘total income’ (TI) is derived after subtracting the various deductions under Section 80 from the GTI. So, you first calculate the GTI and then subtract the deductions to arrive at the TI.

Difference between Gross Total Income & Total Income

To understand their difference in simple terms, look at the following formulae:

TI = GTI – deductions under Section 80

Or

GTI = TI + deductions under Section 80

So, GTI is the total of all the heads of income while TI is GTI minus the deductions.

To calculate GTI, you add the following:

• Income from salary: This includes the earning from employment.
• Income from house property: This includes any rent you earn by letting out a house.
• Income from business or profession: This includes the income earned by a businessman or a self-employed professional.
• Capital gains/loss: This includes profits or losses you incur by selling any movable or immovable capital property. That would include land, building, house, shares, jewellery, etc.
• Income from other sources: The income not included in the above-mentioned heads features in this. Examples would be income from interest, a lottery gain, etc.

To calculate TI, the following deductions under Section 80 of Chapter VI of the Income Tax Act are subtracted from the GTI

• 80C: Allows specific investments and expenses to be deducted from the GTI up to Rs 1.5 lakh.
• 80CCD: NPS (National Pension System) contribution up to Rs 50,000 is allowed as deduction.
• 80D: Health insurance premiums, up to Rs 60,000, paid for self and for parents qualify under this section.
• 80TTA: Interest earned from the savings account, up to Rs 10,000, is tax-free.
• 80E: Interest paid on education loan is deducted.
• 80GG: This includes housing rent allowance (HRA) exemption for those who do not have an HRA component in their salary.
• 80DDB: Expenses incurred on specific illnesses are deducted up to Rs 40,000 or Rs 60,000, depending on the patient’s age.
• 80U: This gives a fixed deduction if you have a physical disability. The deduction is Rs 75,000 or Rs 1.25 lakh, depending on the severity of the disability.
• 80G: Charitable donations made to recognised institutes are allowed as deduction.