As per the Income Tax Act, a person can earn income from different sources and these sources, are categorized as heads of income. In the context of income tax, the terms gross total income and total income are often used, wherein gross total income is the aggregate of income calculated under the five heads. On the other hand, total income is the income on which income tax to be levied is calculated. In this article, we are going to talk about the difference between gross total income and total income, along with the step-by-step process of income tax calculation.
What is Gross total income?
Gross total income (GTI) is essentially the unfiltered sum of all the money you earn before any deductions or taxes are applied. Gross Total Income is the aggregate of all the income earned by you during a specified period. According to Section 14 of the Income Tax Act 1961, Income can arise from sources like salary, house property, business and professions, capital gains, and other sources. Once you have your GTI, you can then subtract allowable deductions and exemptions to arrive at your total income, which is the amount used to determine your tax liability.
What is the Total income?
Total income is the amount of money you earn that is subject to taxes. It's essentially your gross total income (GTI) minus any allowable deductions and exemptions. Total Income or TI is the income of an assessee on which tax liability is calculated. To arrive at the total income of the assessee one has to calculate the gross total income of the assessee.
Difference between gross total income and total income
Basis | Gross Total Income | Total Income |
|---|---|---|
Meaning | Total income is calculated under all five income source heads after clubbing and setting off losses. | The income amount is used to calculate an assessee’s tax payable. |
Tax treatment | Tax is not levied on this income base. | Income tax is payable on this income base. |
Deductions | The income is arrived before providing with any deductions under Chapter VIA of the Income Tax Act. | The income is arrived after providing with any deductions under Chapter VIA of the Income Tax Act. |
Income tax obligations | Gross Total Income is not used to determine income tax obligations | The total income is used to determine and/or assess the income tax obligation |
Income equals to | The entire income earned in a financial year before claiming deductions under Chapter VI-A | Deductions under Section 80 (80C to 80U) |
Purpose | Gross Total Income gives a holistic view of an individual’s or organization’s earnings. | Total Income gives a clear picture of the taxable income of an individual or organization. |
Conclusion
Tax is always applicable on the total income of the assessee, calculated with a step by step process, wherein first of all Gross Total Income is determined and after which deductions are made to reach the total income figure. So, we can say that: Total Income = Gross Total Income – Deductions.