Difference between Gross Total Income and Total Income

Difference between Gross Total Income and Total Income

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Jaya
Jaya Sharma
Assistant Manager - Content
Updated on Feb 9, 2024 12:31 IST

Understanding the difference between Gross Total Income and Total income is crucial for effective financial planning and tax management. For accurate calculation of Gross Total Income and Total income tax consultant is important.

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In this article, we will be learning the difference between Gross Total Income and Total Income. We will also discuss the features in detail.

Table of Contents

Difference between Gross Total Income and Total Income

Here is the tabular difference between Gross Total Income and Total Income

Parameters Gross Total Income (GTI) Total Income (TI)
Definition GTI is the total income earned by an individual or organization before deductions like tax and other allowances. It includes income from all sources such as salary, business profits, capital gains, and other incomes. TI is the income that remains after all permissible deductions under the Income Tax Act have been accounted for. It is essentially the GTI minus the deductions.
Taxation Tax is calculated on the total income, not on the gross total income. However, GTI is the starting point for calculating tax. Tax is directly calculated on the total income.
Components GTI includes all types of income – salary, house property, business or profession, capital gains, and other sources. TI is derived by subtracting permissible deductions and exemptions from the GTI.
Purpose GTI gives a holistic view of an individual’s or organization’s earnings. TI gives a clear picture of the taxable income of an individual or organization.

What is Gross Total Income (GTI)?

GTI is the aggregate of all the income a person has earned during a financial year before any deductions are applied. It includes income from all sources such as salary, house property, business or profession, capital gains, and other sources. It’s important to note that GTI is not necessarily the amount of money that a person has received in hand. It’s the total income earned, irrespective of whether it has been spent, saved, or invested.

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Features of Gross Total Income (GTI)

The following are the features of GTI:

  • Comprehensive Income: GTI includes all forms of income, regardless of their source. This could be salary, income from house property, profits from business or profession, capital gains, and income from other sources.
  • Pre-Deduction Income: GTI is the total income before any deductions or exemptions are applied. It does not take into account any tax-saving investments or deductions under sections 80C to 80U of the Income Tax Act.
  • Basis for Tax Calculation: GTI serves as the starting point for calculating tax liability. Deductions and exemptions are subtracted from the GTI to arrive at the Total Income, which is the taxable income.
  • Indicator of Earning: GTI is a comprehensive measure of an individual’s or entity’s total earnings. It provides a broad picture of the total income generated by an individual or entity in a financial year.

What is Total Income (TI)?

Total Income, on the other hand, is the amount of income that is subject to tax. It is calculated by subtracting the deductions and exemptions allowed under the Income Tax Act from the GTI. The resulting figure is the amount of income on which a person is required to pay tax.

Features of Total Income (TI)

The following are the features of GTI:

  1. Post-Deduction Income: TI is the income that remains after all eligible deductions and exemptions have been subtracted from the GTI. These deductions could be under sections 80C to 80U, section 24(b) (home loan interest), and others.
  2. Taxable Income: TI is essentially the taxable income. It is the income on which an individual or entity is required to pay tax. The tax slabs are applied on this income to calculate the tax liability.
  3. Derived from GTI: TI is calculated by subtracting eligible deductions and exemptions from the GTI. It is a derived income, as it is based on the GTI.
  4. Indicator of Net Income: TI provides a more accurate measure of an individual’s or entity’s net income. It reflects the income that is actually available to the individual or entity for use after accounting for tax-saving investments and deductions.

Conclusion

GTI and TI are two critical concepts in the field of income tax. GTI represents the total earnings of an individual or an organization before any deductions, providing a comprehensive view of the income earned from all sources. On the other hand, TI is the net income subject to tax, obtained after subtracting all permissible deductions and exemptions from the GTI. 

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FAQs

How is Gross Total Income calculated?

Gross Total Income is calculated by adding all the income from various sources. This includes salary, income from house property, profits from business or profession, capital gains, and income from other sources.

How is Total Income calculated?

Total Income is calculated by subtracting all the deductions and exemptions from the Gross Total Income. These deductions can be under sections 80C to 80U of the Income Tax Act.

Can Gross Total Income and Total Income be the same?

No, Gross Total Income and Total Income cannot be the same. Gross Total Income is the income before any deductions or exemptions, while Total Income is the income after all deductions and exemptions have been applied.

What are the common deductions that reduce Gross Total Income to Total Income?

Common deductions include contributions to provident fund, life insurance premiums, repayment of home loan principal, tuition fees, investment in tax-saving fixed deposits, and medical insurance premiums. These are covered under various sections of the Income Tax Act, like 80C, 80D, etc.

About the Author
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Jaya Sharma
Assistant Manager - Content

Jaya is a writer with an experience of over 5 years in content creation and marketing. Her writing style is versatile since she likes to write as per the requirement of the domain. She has worked on Technology, Fina... Read Full Bio