What is Total Income and How to Calculate It?


(Last Updated On: April 1, 2019)

Total Income (TI) or Gross Total Income (GTI) are the terms used interchangeably but differ in substance. Where Gross Total Income is calculated by summing up earnings received as per all five heads of income. Total income is arrived at after deducting from Gross Total Income deductions under Section 80C to 80U (namely, Chapter VI A deductions) under the Income Tax Act 1961. Which means GTI is a large component out of which on subtracting certain specified amount we can arrive at the TI.


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.

How Total Income is computed?

Total Income can be computed by

The resultant amount is Total Income.

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

Particulars

Amount

Rs. Rs.
1. Income from salaries
Income from salary
Income by way of allowances
Taxable value of perquisites
xxx
xxx
xxx
Gross salary xxx
Less: Deduction under Section 16
Entertainment allowance
Professional tax
xxx
xxx
Income from salaries
xxxx
2. Income from house property
Adjusted net annual value  
Less: Deduction under section 24
xxx
xxx
Income from house property
xxxx
3. Profit and gains of business or profession

 Net profit as per profit and loss account xxx
Add:Amounts which are debited to P&l a/c but are not allowed as a deduction under the act xxx
Less: Expenditure which are not debited to P&L a/c but are allowed as a deduction under the act xxx
Less: Income which are credited to P&L a/c but  are exempt under section 10 xxx
Add: Income which are not credited to P&L a/c but are taxable under this head xxx
Profit and gains of business or profession
xxxx
4. Capital Gains

Amount of capital gains
Less: Amount exempt under sections 54, 54B,54D,54EC,54F, 54G, 54GA, 54GB, and 54H
xxx xxx
Income from Capital Gains
xxxx
5. Income from other sources

Gross income
Less: Deduction under section 57
xxx
xxx
Income from other sources
xxxx
Total [i.e., (1) +(2) +(3) +(4) +(5)]
xxxx
Less: Adjustment on account of set-off and carry forward of losses
xxx
Gross total income
xxxx
Total Income or Net income
XXXX

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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.