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What is Gross Total Income. Meaning / Difference between Gross Total Income and Total Income under Income Tax Act, 1961

Very often, the terms "Gross Total Income" [GTI] and "Total Income" [TI] are grossly mis-understood by number of people. The proper understanding of the two terms is of paramount importance for proper computation of income tax and preparation of income tax return.

Let's snoop into the realms of the two terms

What is difference between Total Income and Gross Total Income ?


Income Tax is payable on the total income at the rates of income tax prescribed. The term GTI has been defined in sub-section 45 of section 2 (Chapter II) of Income Tax Act, 1961 as under:  

"total income" means the total amount of income referred to in section 5, computed in the manner laid down in this act.  

Section 5 determines the scope of total income for a resident or a non-resident assessee. It follows that for a resident assessee, the total income include all income that accrue, arise, earned or received in India (except those income which accrues or arises outside India)  

However various chapters and sections of the Income tax Act further lays down which income would not form part of total income, computation to be made, Clubbing of Income, set off or carry forward of loss and deductions to be made in computing total income.  

We can summarise the step by step process of arriving at "total income" as under:

Chapter No.

Chapter Heading

Scope

II

Basis of Charge

Determination of Residential Status

III

Incomes which do not form part of total income

Exempt Incomes (i.e., agricultural income etc.)

IV

Computation of Total Income

Income to be classified under 5 heads:
(i) Salaries;  (ii) House Property; (iii) Profit and gains of business or profession; (iv) Capital Gains; (v) Other Sources

V

Income of other persons Included in assessees income

Under clubbing provisions, diversions of income are required to be added back to the income of the assessee

VI

Aggregation of income and set off or carry forward of loss

Aggregation is done when the assessee is not able to explain certain investments, money etc. Aggregation is also done for assessee's share income of association of person or B.O.I. Set off of losses against incomes of the same year is allowed and losses that can’t be fully set off are allowed to be carried forward and set off in subsequent years.

VI-A

Deductions to be made in computing total income

This chapter deals with the deductions to be made in computing total income from the gross total income for arriving at total income

As per section 80A of the Chapter VI-A, "in computing the total income of the assessee,  here shall be allowed from his   gross total income........ deductions specified in section 80C to 80U."  

Now, a close look at the chapter-wise funnel makes both the term abundantly clear.

Gross Total-Total Income Funnel >

 

It can be easily understood that:

Adding incomes from Chapter-II to Chapter-VI = Gross Total Income (GTI)

and

Gross total Income minus Deduction Chapter VI-A = Total Income (TI)

 

Gross Total Income as per ITR-1

What is Gross Total Income

 

What Deductions/exclusions are linked to Total Income or Gross Total Income under various sections of Income tax Act.

Section 17 - Salary, perquisite and profits in lieu of salary defined.
Any expenditure incurred by the employer on travel for medical treatment of the employee, or any member of the family of such employee, outside India shall not be considered as perquisite only in the case of an employee whose Gross Total Income , as computed before including therein the said expenditure, does not exceed two lakh rupees. Proviso to sub section 2(viii).

Section 80A - Deductions to be made in computing total income The aggregate of various deductions under chapter VIA shall not exceed the gross total income of the assessee

Section 80AB - Deduction to be made with reference to income included in the gross total income
Gross Total Income shall be considered as including that income for example interest for which deduction is available under section 80TTA

Section-80CCD Deduction in respect of contribution to pension scheme of Central Govt.
Deduction is limited to ten per cent of his Gross Total Income in the previous year

Section-80CCG Deduction in respect of investment made under an equity saving scheme
The deduction shall be subject to the condition that GTI of the assessee for the relevant assessment year shall not exceed Rs. 10 lacs

Section-80G - Deductions for Donations 
For certain donations in excess of ten per cent of the gross total income is ignored for the purpose of computing the aggregate of the sums in respect of which deduction is to be allowed

Section-80GGA - Deduction in respect of certain donations for scientific research or rural development
No deduction under this section shall be allowed in the case of an assessee whose gross total income includes income which is chargeable under the head "Profits and gains of business or profession

Section 111A Tax on short-term capital gains in certain cases
Where the GTI of an assessee includes any short-term capital gains referred to in sub-section (1), the deduction under Chapter VI-A shall be allowed from the GTI as reduced by such capital gains.

Section 112 -  Tax on long-term capital gains
Where the GTI of an assessee includes any income arising from the transfer of a long-term capital asset, the GTI shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the GTI as so reduced were the GTI of the assessee.

Section-87A - Rebate of income tax. (Read more on section 87A Rebate)  >>  
From AY 2014-15, an resident individual with total income  not exceeding Rs. 5 lakhs is entitled to a rebate up to Rs. 2000/-

Surcharge on income tax 
For AY 2016-17 surcharge on income tax is 10% in case of a person having a total income exceeding one crore rupees .

Section 139(1) Filing of Income Tax Return 
A person is required to file pees .Income Tax Return only if Total Income exceeds the basic exemption limit

What is Gross Total Income? Meaning / Difference between Gross Total Income and Total Income under Income Tax Act, 1961

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