Calculate your Gross Total Income: The Simplified Way

Imagine building a puzzle. Each piece represents a different source of income: salary, rental income, investment returns, capital gains, and likewise. You see, on their own, the pieces don’t show the full picture. But when you fit them all together, you reveal your Gross Total Income (GTI). Only when the puzzle is complete can you begin planning your taxes effectively.

What are the components of the Gross Total Income?

Your Gross Total Income includes five main components:

• Income from Salary: This is your regular paycheck, bonuses, and allowances.
• Income from House Property: If you earn rent from a property, it counts.
• Profits and Gains from Business or Profession: If you're self-employed or a freelancer, your business income comes under this category.
• Capital Gains: Earnings from selling shares, mutual funds, or property fall here.
• Income from Other Sources: Interest on savings, dividends, lottery winnings (yes, even that lucky scratch card!)

So, GTI will be the sum of all these earnings.

Formula to Calculate Gross Total Income (GTI)

GTI = Income from Salary + Income from House Property + Income from Business/Profession + Capital Gains + Income from Other Sources (after setting off eligible losses)

When you apply deductions under Chapter VI A to the GTI (u/s 80C to 80U), you arrive at the total income or taxable income.

Let us consider a simple example:

So, your GTI is ₹1,017 and your tax payable will be on the total income of ₹1,009.

Note: The above example is a simplified and illustrative scenario to show how different income heads add up to Gross Total Income (GTI). Deductions under Chapter VI-A such as Section 80C, 80D, etc. are applied after calculating GTI to arrive at Total Taxable Income. This sequencing is mandated under the Income tax Act.

Frequently Asked Questions

1. What is Gross Total Income (GTI)?

GTI is the combined income from all five heads after adjusting eligible losses. It’s the base on which deductions are later applied.

2. Are deductions included in GTI?

No. GTI is calculated first. Deductions like 80C or 80D are applied after GTI to arrive at taxable income.

3. Why are losses adjusted before GTI?

Because the tax law allows set off of eligible losses first. GTI must reflect your net income after these adjustments.

4. Can exempt income be part of GTI?

No. Exempt income like PPF interest is reported for disclosure but not added to GTI.

5. Can GTI be negative?

Individual heads can show losses, but GTI itself becomes the net total after set off and cannot be negative overall.

6. Is GTI used in both tax regimes?

Yes. GTI applies under both old and new regimes, but the deductions that follow differ.

Conclusion

You need to compute your Gross Total Income correctly. Doing so helps you avoid overpaying taxes or getting an IT notice. It is also vital since your tax liability and eligibility depend largely on the total earnings reported for the year.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.