PROSPERR.IO

Ever filled out a tax return and scratched your head at the difference between taxable total income and gross total income? You're not alone! While they sound similar, understanding these terms is crucial for navigating the world of taxes in India. This blog post will be your one-stop guide, explaining the key differences, how to calculate taxable income, and some tax-saving tips!

Gross total Income

Think of your gross income (Gross Total Income) as the aggregate of income computed under all five heads of income in accordance with the provisions of the Income-tax Act before allowing deductions under chapter-VIA of the Act, such as deduction under section 80C, 80D, etc. The income is classified under the 5 heads of income as detailed below:

• Salary: including the perquisites and profits in lieu of salary and pension from the employer or former employer 
• House Property: Income generated from renting out property.
• Capital gains: Profits from selling capital assets like stocks or real estate.
• Business and profession: Profits earned from your business or profession
• Other Sources: Interest, family pension, dividend, etc.

Also Read- 8 Reasons Why Old Tax Regime is still Attractive

Taxable total Income

Taxable income is the portion of your gross total income that the government actually taxes. It's calculated by subtracting allowable exemptions, deductions and setting off losses from your gross total income. 

Here's a table summarizing the key differences:

Is a Tax Refund Considered Income?

No, a tax refund is not considered income. It's simply the money you overpaid in taxes throughout the year that the government returns to you; however, interest on refunds is income under the heading “Income from other sources.”

Also Read- Difference Between Tax Planning vs. Tax Evasion

Conclusion

Knowing the difference between taxable total income and gross total income empowers you to make informed financial decisions. calculate your taxable income, explored ways to reduce your tax burden, and gained valuable insights for making informed financial decisions. Knowing your taxable income allows you to predict your tax obligations, enabling better financial planning. Certain investments offer tax benefits. By knowing your taxable income, you can choose options that optimize your tax savings.

Prosperr.io is an easy-to-use platform for handling your income taxes. It helps you get the most savings and automates the process. It gives you the information you need to make informed financial choices.

(Disclaimer- The information contained in this blog post is for general informational purposes only and is not intended to be construed as tax advice. Consult with a tax advisor for personalized guidance based on your specific financial situation.)