Income is the earnings made by a person, or an employee, especially regularly, in exchange for work done by the employee as assigned by the employer. Some slabs in the income are taxable by the government; the tax is imposed on individuals or entities, whereas the tax imposed on companies is known as corporate tax.
Gross Total Income and Total Income are the two most common income types, yet people get confused between them.
- Gross Total Income (GTI) is the aggregate of all income sources before applying for deductions or exemptions.
- Total Income is derived by subtracting deductions and exemptions from the Gross Total Income.
- GTI determines a tax liability, while Total Income is the final taxable Income after considering deductions.
Gross Total Income vs Total Income
The difference between Gross Total Income and Total Income lies in their meanings, where the former, i.e. Gross total income, denotes the total earnings from all the heads of payment, the latter i.e.
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Gross Total Income is the total income the individual earns, including income from all the heads. There are five types of payment: income from property, income from salary, income from other sources, income from business or profession, and lastly, income from capital gains.
On the other hand, Total Income is achieved by subtracting the deductions under Section 80 from Gross Total Income.
|Parameter of Comparison||Gross Total Income||Total Income|
|Meaning||Refers to income earned by an individual, or an entity from all the heads, before taxes or other deductions are implied.||Total income is the income estimated after subtracting deductions under section 80 from Gross Total income.|
|Represents||Represents revenue generated or income earned before the taxes and other deductions have been made.||On the other hand, total income represents the income on which tax liability is determined.|
|Importance||It is the aggregate of the incomes earned by all the heads; it denotes the deductions to be made.||In the case of total income, it is necessary to calculate full payment to ascertain an individual’s tax liability as per their income.|
|Formula||Gross total income = Total income (sum of all heads) + the deductions under Section 80 from Gross Total Income.||Total Income = Gross Total Income – Deductions under Section 80 from Gross Total Income.|
|Tax||Tax is not levied on total gross income.||Tax is levied on the total income.|
What is Gross Total Income?
Gross total income is the summation of income from all the heads; an individual commonly earns it through paychecks before tax and other deductions. It is only after the clubbing of income that the set-off and carry forward of losses take place.
Necessary calculations to be made to achieve total gross income are:
- Identification of residential statuses such as resident or non-resident is again sub-categorized into resident and ordinarily resident or resident but a non-ordinarily resident.
- Income classification: It determines which income belongs to which group.
- Calculation of income from each head.
- Clubbing of income: Clubbing of payment is done to prevent the avoidance of tax; under clubbing, the income of minors, as well as the spouse of the assessor, is added to the total income.
- Set-off or carry forward of losses: There may be losses incurred under one head which is set off against profit from some other source under the same head.
What is Total Income?
Total income is the earnings derived after subtracting the deductions under section 80C to 80U. To reach total income, one has to obtain the assessee’s gross total income (the person liable to pay tax).
Necessary calculations to be made to achieve total income are:
- Deductions from the total gross income: Only after the analysis of the total gross income of the assessee are the deductions under section 80 allowed from the total gross income. The deductions are only made if the total gross income is positive.
- Rebate, if any
- Advance tax, as well as TDS
Main Differences Between Gross Total Income and Total Income
- Gross total income and total income are of distinct meanings, where the former denotes the sum of the incomes from the heads or sources of income. In contrast, the latter denotes the total income after subtracting the deductions according to Section 80 of total gross income.
- Deductions are not made while calculating total gross income. On the other hand, deductions play an essential role while calculating total income, as it is the only difference between total gross income and total income.
- Tax is levied on total income, whereas in the case of total income, it is not levied.
- Gross total income is the aggregate income of all the incomes from distinct heads or sources, while on the other hand, total income is the income we obtain after deductions under sections 80C to 80U.
- The tax liability is calculated based on total income, not gross income.
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.