Gross Total Income (GTI): Tax in itself is a tedious phenomenon, and the complexity increases when various terms are also included in the list. We all know that tax is charged levied on an individual’s income. However, the pay can further be classified and referred to by numerous names in India, such as
- Exempt Income
- Taxable Income
- Total income
- Gross Total Income Etc.
In this article, we will discuss the understanding of the Gross Total Income or GTI.
- What is Gross Total Income?
- What are the various additions needed to be made in the Gross Total Income?
- Why must the Gross Total Income (GTI) be calculated?
- What is the Total Income? State the difference between one’s Gross Total Income (GTI) and the Total Income?
- When do taxpayers have to pay the taxes on their income?
- Frequently Asked Questions
What is Gross Total Income?
As the title suggests, Gross Total Income is the accumulation of all the income earned by an individual during a specific period. As per Section 14 of the 1961 Income Tax Act, the income of any individual or any assessee can be classified under these five categories,
- Income from Salaries
- Income from House Property
- Profits and Gains of Business and Profession
- Capital Gains
- Income from Other Sources
And, the Gross Total income is calculated when the earnings from all the five categories of income are taken under together.
Taxation calculation and investment in tax-saving schemes are essential annual exercises if you are earning money. In India, one may feel overwhelmed with the number of many tax jargons and numerous deductions.
The 1961 Income Tax Act defines both the terms as follows:
Section 80B (5) of the IT Act defines the Gross Total Income
- Includes income received or receivable by an individual in the prior-year adjusted for the clubbing and carry-forward amounts from previous years.
- Deduct the non-taxable parts of one’s income from this amount to estimate ‘Gross Total Income.’
What are the Various Additions that Needed to be Made in the Gross Total Income?
Apart from summing up the earnings from all the five categories of income, the following might also be added in order to calculate one’s total gross income.
- Income to be added according to the clubbing provisions under the Income Tax Act.
- Adjustments for the set-off and carry forward of the losses.
- Unexplained Tax Credit under section 68 of the 1962 Income Tax Act, received in cash or credit. This implies receipt of any amount of which one does not have sufficient or valid explanation describing the source of receipt of such income. These kinds of income are added to one’s Gross Total Income.
- Unexplained Investments, i.e., the investments one has made, but one cannot give a satisfactory explanation about the source, or improper disclosures have been made on their part. In all such situations, their investments are going to be termed unexplained investments as per the purview of section 69 of the 1961 Income Tax Act. Also, it shall be added to the Gross Total Income (GTI)
- Assets and other income under Section 69A, valuables such as money, jewelry etc., for which no proper explanation is ready with the assessee, is going to be added to the Gross Total Income of the individual.
- Undisclosed or the lower disclosed income is going to be added to the individual’s Gross Total Income as per Section 69B of the 1961 Income Tax Act. This relates to all those income and assets that have not been reported or made a lower disclosure than the actual funds.
- Unexplained expenditures under section 69C. Suppose one has made some expenses and no proper explanation regarding the same available. In that case, it is going to be added to the Gross Total Income and subsequently charged to taxes accordingly.
- Hundi amount borrowed or repaid. Suppose one has taken or refunded a particular amount on the Hundi. In that case, it is going to be added to the individual’s Gross Total income or GI according to the provisions of section 69D of the 1961 income tax act.
Even though we have understood the above income and assets or expenditures added to the total gross income, these additions or the nature of additions are not usually witnessed in routine.
Why Must the Gross Total Income (GTI) be Calculated?
The computation of total gross income is necessary as
- It is the amount needed to be disclosed when filing the Income Tax Return.
- Deductions under Chapter VI A are needed to be deducted from the GTI to arrive at the taxable or total income.
Gross Total Income is not going to include:
While calculating the total gross income, one is needed to sum up all of their income without reducing the amount for any tax-saving investments that have been made under Section 80C to 80U under the 1961 Income Tax Act.
What is the Total Income? State the Difference Between one’s Gross Total Income (GTI) and the Total Income?
The income that arrived after claiming all the allowable deductions from an individual’s Gross Total Income is known as the individual’s Total Income.
Gross Total Income is the sum of all of the income an individual receives during a year. On the other hand, Total income is the amount of income subject to taxation after all the allowable deductions or exemptions have been subtracted from the Gross Total Income.
Total income =Gross Total Income –Allowable Deductions
When Do Taxpayers have to Pay the Taxes on their Income?
The taxes on one’s income can be finalized after the completion of the previous year. But, to enable a regular flow of the funds and easing the taxes collection, the 1961 Income-tax Act has provisions for payment of taxes in advance during the year of earning itself or prior to completion of the previous year. It is also known as the Pay as one’s made concept.
The Government collects taxes by the following means:
- Voluntary payment by the country’s taxpayers into different designated Banks like the Self-Assessment tax, Advance tax, etc.
- Taxes deducted at source.
- Taxes collected at source
- Equalisation Levy
FAQ’s On Gross Total Income
What is included in total gross income?
Gross income is an individual’s income earned, the total income on a paycheck before the taxes and others are deducted. It involves all the incomes of an individual from all the sources – including wages, interest income, rental income, and dividends.
How do I calculate the gross income from net income?
Revenue – Cost of the Goods Sold – Expenses = Net Income
The first part of the formula, revenue subtracted from the cost of goods sold, is also the formula for gross income.
Is total gross income yearly or monthly?
Gross income refers to the total amount earned by an individual before the taxes and other deductions, just like the annual salary. In order to determine gross monthly income, divide the full salary by 12 for the months in the year.