What is the difference between gross total income and total income?

May 02, 2018 | 7 months ago | Read Time: 2 minutes | By iKnowledge Team

Filing income tax returns is a technical process. You should know the meaning of technical terms and declare your income under the proper head. This process and the jargon involved often confuse taxpayers. That is why they seek the help of tax consultants and chartered accountants for preparing their tax returns.

Take the instance of ‘gross total income’ and ‘total income’. These are most common terms and, yet, people confuse between the two. Most taxpayers use these terms interchangeably, but are these the same? No, they are not. Let us understand how the two differ from each other.

What is gross total income?

The ‘gross total income’ (GTI) is the total income you earn by adding all heads of income. Income from salary, property, other sources, business or profession, and capital gains earned in a financial year are all added to arrive at the GTI.

What is 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.

How do they differ?

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.

To sum up, the difference between the GTI and TI must be clear to you now. Do not confuse between the two the next time you file your returns.

Advt. no.: IA/Apr 2018/3900


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