Gross Total Income (GTI) [Section 80B(5)]
Definition: Gross Total Income (GTI) refers to the sum of income from all sources before applying any deductions under Chapter VIA (Sections 80C to 80U) of the Income Tax Act. It includes income from various heads specified under Section 14 of the Act.
Heads of Income:
- Income from Salaries: Income earned from employment.
- Income from House Property: Income from rental properties.
- Profits and Gains of Business or Profession: Income from business activities or professional services.
- Capital Gains: Income from the sale of capital assets like property, stocks, etc.
- Income from Other Sources: Income that does not fall under the above categories, such as interest, dividends, winnings from lotteries, etc.
Calculation: To calculate GTI, you need to:
- Aggregate income under all the specified heads.
- Apply clubbing provisions if required (e.g., income of a minor child).
- Adjust any losses incurred.
Formula: Gross Total Income (GTI) = Income from Salaries
+ Income from House Property
+ Income from Business or Profession
+ Capital Gains
+Income from Other Sources
+ Clubbing of Income
− Set-off of Losses
Total Income [Section 2(45)]
Definition: Total Income is the income remaining after deducting eligible deductions under Chapter VIA (Sections 80C to 80U) from the Gross Total Income.
Calculation: To determine Total Income, you deduct eligible deductions from the GTI. These deductions may include contributions to provident funds, insurance premiums, educational expenses, medical insurance, and others specified under Chapter VIA.
Formula: Total Income = Gross Total Income (GTI) − Deductions under Chapter VIA
Taxation: Income tax is levied on Total Income at rates prescribed in the Finance Act for the relevant assessment year.
Rounding Off
- Rounding Off Total Income [Section 288A]:
- Total income is rounded off to the nearest multiple of 10.
- If the last digit is 5 or more, round up to the next higher multiple of 10.
- If the last digit is less than 5, round down to the lower multiple of 10.
- Rounding Off Tax [Section 288B]:
- The amount of tax payable, including tax deductible at source (TDS), advance tax, interest, fine, penalty, and refund, is rounded to the nearest rupee ten.
- If the last digit is 5 or more, round up to the next higher multiple of 10.
- If the last digit is less than 5, round down to the nearest lower multiple of 10.
Summary:
- Gross Total Income (GTI) is the aggregate of income from all specified sources before deductions.
- Total Income is the GTI after applying deductions under Chapter VIA.
- Rounding off rules ensure that both total income and tax amounts are adjusted to the nearest multiple of 10, simplifying calculations and payments.
These definitions and calculations are crucial for determining the taxable income of an individual or entity and ensuring compliance with the Income Tax Act.