Gross Total Income: Know How It is Different From Total Income

2025-05-21

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Taxation calculation and investment in tax-saving schemes is important annual exercises if you are earning money. In this country, you may at times feel overwhelmed with the many tax jargons and numerous deductions. For example, the gross total income (or gross income) and total income, which literally means the same thing. However, legal meanings may differ.

Key Takeaways

Gross Total Income (GTI) includes all earnings from various sources before deductions, whereas Total Income is the taxable income after applying deductions under the Income Tax Act.
GTI includes salary, rental income, business profits, capital gains, and income from other sources, along with carry-forward losses and clubbed income.
Total Income is derived by subtracting deductions (under Sections 80C to 80U) from GTI, and tax is levied based on this final amount.
Taxation varies based on income sources, such as house property income (deductions for home loan interest), agricultural income (added for slab determination but not taxed), and gifts (taxable above ₹50,000 from non-relatives).
Smart investments in tax-saving instruments like PPF, ELSS, health insurance, and education loans can help reduce taxable income and optimise tax liability.

Meaning of Gross Total Income & Total Income

Gross Total Income

Section 80B(5) of the Income Tax Act 1961 defines Gross Total Income as income received or receivable by you in the previous year adjusted for clubbing and carry-forward amounts from the previous years.

Deduct the non-taxable parts of your income from this amount to estimate ‘Gross Total Income’

Note: Investments and expenses under section 80C to 80U are deducted from this amount.

In simple terms, gross total income is the aggregate of all your taxable receipts from the previous year. It will also include profit or loss carried forward from past years and any income after clubbing provisions. But will not include any deductions from sections 80C to 80U.

Gross Total Income Example

You can understand what is total gross income better with its examples. It includes all of a person's earnings from all sources, such as dividends, interest, wages, and rental income.

Total Income

Total Income is defined under Section 2(45) with the scope defined by Section 5 of the Income Tax Act, 1961

If you are an Indian resident in the previous year, any income received, accrued or deemed to be received by you will be accounted for

If you are not ordinarily resident in the previous year, incomes arising out of India will be included only if they are from a business controlled or performed from India

In the case of non-residents (NRI), only incomes arising or accruing in India will be counted

Total Income is arrived by deducting all eligible deductions from “Gross Total Income”

Your tax liability will be estimated on the Total Income. In simple terms, you pay tax on your Total Income.

Total Income Example

To better understand total income, its examples include all forms of income, without any deductions, including wages from all sources, capital gains, profits from a business or profession, real estate, and other sources.

See the example below to understand how and where Gross Total Income and Total Income will reflect on your ITR:

Sources of Income	Income (Rs)	Exempt	Cause of Exemption	Taxable (Rs)
Salary/Pension Income	10,00,000	₹50000	Allowances & Perquisites	9,35,000
House Property Income^$	4,00,000	3,21,600	Home Loan Interest, property tax, and standard deduction	78,880
Business & Profession	3,50,000			3,50,000
Capital Gains	1,00,000			1,00,000
Other Sources (interest, lottery, Dividend)	30,000			30,000
Agricultural Income	50,000	50,000	Fully Exempt*	0
Gifts Received				0
from Direct Blood Relations	1,00,000	1,00,000	Fully Exempt	0
from Others (friends & colleagues)	60,000	50,000	Exempt up to 50,000 in a financial year	10,000
Income Share from Partnership Firm	1,50,000	1,50,000	Not taxable (Tax already paid by the firm)	0
Income Share from HUF	80,000	80,000	Not taxable (Tax already paid by the HUF)	0
Royalty Income on Patents/Published work	5,00,000		U/s 80QQB	5,00,000
The income of the Previous Year	28,20,000

Gross Total Income	Exempt (Rs)	Sum of Taxable Incomes	Total Income	Income (Rs)	Gross Total Income (minus deductions)
		20,03,880			15,18,880
Deductions under Chapter VI-A			Add: Agricultural Income		15,68,880
Under Section 80C	1,50,000	Life Insurance premium & home loan repayment	Tax on Aggregate Income*	50,000	2,08,164
Under Section 80D	25,000	The health insurance premium paid	Deduct Tax on Agricultural		(2,500)
Under Section 80QQB	3,00,000	Deduction from Royal income	Net tax liability		2,05,664
Under other parts of Sec. 80	10,000	Donations & charitable contributions	Health and Education Cess		8,226
			Tax Payable	4%	2,13,890

Disclaimer: Table only provides an example of Gross Total Income and Total Income computation. You should refer to the rules for actual exemptions and deductions from various incomes.

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Difference Between Gross Total Income and Total Income

Gross Total Income is the total income a person receives in a given fiscal year, before any deductions are made. It encompasses earnings from all sources, including wages, real estate, businesses, capital gains, and other sources.

The total amount of income that is liable to taxes is called total income. It is computed by deducting from the GTI the deductions and exclusions permitted by the Income Tax Act. The amount of income that must be paid in taxes is the resultant figure. Here is a tabular representation of the difference between gross total income and total income

Parameters	Gross Total Income (GTI)	Total Income (TI)
Definition	Gross Total Income is the total income received by a person or entity before various deductions, such as taxes and other benefits, are made. It encompasses all forms of revenue, including wages, capital gains, business earnings, and other types of income.	Total Income is the amount of income left over after all allowed deductions under the Income Tax Act have been deducted. It is basically the Gross Total Income less the subtraction.
Tax	Instead of using the gross total income, taxes are computed on the entire income.	The total income is used to calculate taxes immediately.
Components	All forms of income, including capital gains, wages, house and property, business and profession, and other sources, are included in Gross Total Income.	The total income is calculated by deducting the allowable deductions and exemptions from the gross total income.
Purpose	Gross Total Income provides a comprehensive picture of a person's or an organisation's income.	Total Income provides a clear picture of a person's or an organisation's taxable income.

What Are the 5 Heads of Income in India?

In India, the Income Tax Act categorises income into five broad heads for taxation purposes. Understanding these classifications can help you manage your tax liabilities efficiently and make informed financial decisions. Here’s a brief overview of these five heads for better understanding:

Income from Salary: This includes earnings received by an individual from an employer in the form of salary, wages, bonuses, allowances, or pensions. The employer deducts TDS (Tax Deducted at Source) before disbursing the salary. Employees can claim deductions such as House Rent Allowance (HRA), Standard Deduction, and Professional Tax to reduce their taxable income.
Example: If you are employed at a company and receive a monthly salary, bonuses, and allowances, this falls under income from salary.
Income from House Property: This head includes income earned from renting out residential or commercial property. Even if the property is vacant but eligible to generate rental income, it is still considered under this category. The tax calculation takes into account municipal taxes. For example, standard deduction (30% of net annual value) and home loan interest deductions under Section 24(b) of the Income Tax Act.
For instance, if you own a house and rent it out, the rental income will be taxed under this category. If you have taken a home loan, you can claim deductions on interest payments.
Income from Business or Profession: Any income earned through self-employment, freelancing, business activities, or professional services is classified under this head. This includes profits from businesses, consultancy services, or professional fees. Taxpayers can deduct business expenses such as rent, salaries, depreciation, and office expenses before arriving at their taxable income.
For example, if you run a business, work as a freelancer, or provide professional services like consulting or legal advice, your earnings are taxed under this head.
Income from Capital Gains: Capital gains arise when you sell capital assets like listed shares, real estate, tax-free bonds, stocks, or mutual funds at a profit. These gains are further categorised into:
- Short-term Capital Gains (STCG): Profits from selling assets within a short holding period, taxed as per applicable rates.
- Long-term Capital Gains (LTCG): Gains from assets held for a longer duration, taxed at concessional rates.
  
  Moreover, tax exemptions are available under Sections 54, 54EC, and 54F for reinvesting gains in specified assets.
Income from Other Sources: This category includes income that does not fall under the above four heads. Common examples are:
- Interest earned on savings accounts, fixed deposits, or bonds
- Dividends from investments
- Lottery winnings, gifts, or inheritance (subject to tax laws)
- Pension (other than employer-provided)

Clarifications for Treatment of Different Incomes in the Estimate

1. House Property Income ($)

For our calculation, we are assuming that the property is let out with an Annual Lettable Value of Rs 4.8 lakhs

For taxable income from the property, we need to deduct:

Municipal taxes (value after this deduction is called Net Annual Value)
30% of Net Annual Value
Interest paid on home loan (up to Rs 2 lakhs)

2. Agricultural Income (*)

Agricultural income alone does not attract any tax
If you have other taxable incomes as well, your agricultural Income is added to taxable income to determine your tax slab
Your tax liability is calculated with agricultural income at first
Then tax on agricultural income is calculated without accounting for the minimum exemption limit of Rs. 2.5 lakhs in the slabs
Your final tax liability = Tax on aggregate income (Taxable income + agricultural income) – Tax estimated on Agricultural Income

3. Gifts (!)

Gifts from non-relatives up to Rs. 50,000 is exempt in one financial year
Gifts from blood relations are completely exempt
Gifts received on your marriage from any party is exempt from tax

How to Calculate Gross Total Income vs Total Income?

Understanding the difference between Gross Total Income (GTI) and Total Income is crucial for accurate tax filing. Gross Total Income in income tax refers to the total earnings from all sources before applying deductions. On the contrary, Total Income (also known as taxable income) is the amount left after subtracting eligible deductions under the Income Tax Act of 1961.

The formula to calculate GTI is to simply add the income from all five heads.

Total income is calculated after subtracting deductions from it. These deductions are available under Sections 80C to 80U. They also help determine your individual tax liability.

Gross Total Income Example

Consider an individual earning from multiple sources in a financial year:

Salary Income: ₹11,45,000
Rental Income from House Property: ₹2,31,000
Business or Professional Income: ₹3,12,000
Long-Term Capital Gains from Mutual Funds: ₹1,55,000
Interest from Fixed Deposits: ₹50,900

The Gross Income in total is calculated as GTI = ₹11,45,000 + ₹2,31,000 + ₹3,12,000 + ₹1,55,000 + ₹50,900

Total Income Example

Now, let’s consider deductions under various sections of the Income Tax Act:

Section 80C (Investments in PPF, ELSS, Life Insurance Premium, etc.): ₹1,50,000
Section 80D (Health Insurance Premium): ₹25,000
Section 80E (Education Loan Interest): ₹40,000

Total Deductions = ₹2,15,000

Now, the Total Income (taxable income) is determined as follows:

Total Income = Gross Total Income−Total Deductions

₹18,93,900 - ₹2,15,000 = ₹16,78,900

This Total Income will then be subject to income tax as per the applicable slab rates.

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Why is the Classification of Income Into Different Heads Necessary?

The Indian tax system categorises income into five heads to ensure proper tax assessment, simplify compliance, and maintain fairness in taxation. Here's why this classification is essential:

1. Ensures Tax Compliance: By classifying income into different heads, the tax department ensures that all sources of earnings are accounted for. This structure prevents tax evasion and ensures individuals and businesses report their incomes correctly.
Promotes Fairness and Equity: Different types of income are taxed differently. For instance, salary income is taxed at slab rates, whereas capital gains may have a flat tax rate. This classification ensures that taxpayers are taxed fairly based on the nature of their earnings.
Simplifies Taxation for Clarity: Grouping income into specific categories makes tax filing more straightforward. It helps individuals and businesses calculate their tax liabilities accurately without confusion over applicable tax rates and exemptions.
Encourages Economic Activities: Certain types of income, such as business profits or capital gains, may be given incentives or tax benefits to encourage entrepreneurship and investment. This classification helps the government implement targeted tax benefits to boost economic growth.
Considers International Taxation Principles: India follows global best practices in taxation. Classifying income into distinct categories aligns with international taxation standards, making cross-border tax treaties and double taxation avoidance agreements (DTAA) more effective.

By understanding these classifications, taxpayers can optimise their tax liability and ensure compliance with the Income Tax Act of 1961.

Summing Up

Despite their similarity, total income and gross total income in income tax are not the same thing. Only the latter are subject to income tax. You can lessen your income tax liability by lowering your overall income and investing in tax-saving plans. To classify diverse sources of income for tax purposes, income can be divided into several headings. Your total income includes all of your earnings from employment, dividends, capital gains, retirement benefits, and other sources of income. The purpose of income categorisation is to ascertain the proper tax treatment for various forms of income, guaranteeing that taxpayers fulfil their legal obligations and pay their fair share of taxes.

Glossary

Gross Total Income (GTI): The aggregate income from all sources before deductions under sections 80C to 80U of the Income Tax Act.
Total Income (TI): The income remaining after subtracting eligible deductions from the Gross Total Income; it's the taxable income.
Income from Salary: Earnings received from an employer, including wages, pensions, bonuses, and allowances.
Income from House Property: Income derived from owning and letting out property, such as rental earnings.
Income from Capital Gains: Profits arising from the transfer of capital assets like stocks, bonds, or real estate.

FAQs Related to Gross Total Income

The total income is calculated by adding up all the sources of income. This covers wages, profits from a business or profession, income from real estate, capital gains, and income from other sources.

The deductions available under Section 80 of Chapter VI of the Income Tax Act are:

Section 80CCC - Deduction of contribution to a pension fund

Section 80CCD - Deduction of contribution to pension scheme of central government

Section 80D - Deduction of premium paid for medical insurance

Section 80E - Deduction of interest paid on education loan taken for higher studies

Section 80GG - Tax deductions on house rent paid

Deduction of interest on savings account - Section 80TTA

You cannot deduct any income from your total gross income that isn't deductible by taxes.

Common deductions that reduce Gross Total Income to Total Income include:

Section 80C Deductions, Home Loan Interest, Medical Insurance Premiums, Interest on Education Loans, Donations to Charitable Organizations, Interest on Bank Savings Deposits, NPS contributions, senior Citizen Medical Expenses.

Gross Total Income and Total Income are related but distinct concepts in India's income tax context. While they are often used interchangeably, their meanings and calculations differ.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.