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Gross Total Income vs Total Income – Key Differences

Your salary is ₹10 lakh but Total Income might be just ₹8.5 lakh! The difference? Deductions. Let's understand GTI vs TI.

Quick Definitions

Gross Total Income (GTI) = Sum of income from all 5 heads (before deductions)

Total Income (TI) = GTI - Deductions under Chapter VI-A (Sections 80C to 80U)

Formula: Total Income = GTI - Chapter VI-A Deductions

The Flow

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Five Income Heads

All income classified under:

  1. Salary (Sections 15-17)
  2. House Property (Sections 22-27)
  3. Profits & Gains of Business or Profession (Sections 28-44)
  4. Capital Gains (Sections 45-55)
  5. Income from Other Sources (Sections 56-59)

Any income not falling in above 4 → Automatically "Other Sources"

Gross Total Income (GTI) Computation

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Chapter VI-A Deductions

Major deductions available:

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Important Deductions

Section 80C (₹1.5 lakh max):

  • PPF, EPF
  • Life insurance premium
  • Tuition fees (2 children)
  • Home loan principal
  • ELSS mutual funds
  • NSC, Sukanya Samriddhi

Section 80CCD(1B) (₹50,000 additional):

  • NPS (National Pension System)

Section 80D (Medical Insurance):

  • Self/family: ₹25,000
  • Parents (below 60): ₹25,000
  • Parents (above 60): ₹50,000
  • Max: ₹1,00,000 (if all senior citizens)

Section 80E (Education Loan Interest):

  • Interest on loan for higher education
  • No upper limit!
  • 8 years from start of repayment

Section 80G (Donations):

  • To charitable trusts, PM CARES, etc.
  • 50% or 100% deductible (depends on donee)

Total Income Computation

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Practical Example

Mr. Sharma (FY 2023-24):

Income Details:

  • Salary (after ₹50k standard deduction): ₹8,50,000
  • House Property (rental income): ₹1,00,000
  • Interest from FD: ₹40,000

Investments:

  • PPF: ₹1,50,000
  • NPS: ₹50,000
  • Health insurance (family): ₹20,000
  • Education loan interest: ₹30,000

Computation:

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Tax calculation:

  • Total Income: ₹7,40,000
  • Rebate under Section 87A (if total income ≤ ₹7L in new regime): NIL tax
  • Otherwise: Tax as per slabs

Savings from deductions: ₹9.9L - ₹7.4L = ₹2.5L reduced from taxable income!

Key Differences

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Which deductions from GTI, which from Total Income?

From individual heads (before GTI):

  • Standard deduction ₹50k (from salary)
  • 30% standard (from house property)
  • Professional tax (from salary)
  • Business expenses (from business)

From GTI (Chapter VI-A):

  • Section 80C to 80U
  • Investment-linked deductions
  • Insurance, donations, etc.

Example 2: With House Property Loss

Mrs. Kapoor:

Income:

  • Salary: ₹6,00,000
  • House Property: (₹2,00,000) - Loss due to ₹2L interest on self-occupied house
  • Bank Interest: ₹30,000

Deductions:

  • 80C: ₹1,50,000

Computation:

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Tax: NIL (below ₹3 lakh in new regime OR ₹2.5L in old regime)

Note: Loss from house property reduces GTI itself!

Set-Off & Carry Forward Rules

Inter-head set-off (before arriving at GTI):

  • Loss from one head can be set off against other head's income

Example:

  • Salary: ₹10L
  • House Property Loss: (₹2L)
  • GTI: ₹8L (loss already adjusted)

Intra-head set-off:

  • Long-term capital loss can only be set off against long-term capital gain
  • Short-term capital loss can be set off against any capital gain

Important Points

1. Deductions only if offered:

  • Can't claim 80C deduction if income itself below taxable limit (no benefit)

2. Deduction ≠ Tax saving:

  • ₹1.5L deduction under 80C
  • Tax saved = ₹1.5L × your tax rate
  • If 20% bracket: Save ₹30,000 tax
  • If 30% bracket: Save ₹45,000 tax

3. New tax regime:

  • Most Chapter VI-A deductions NOT allowed
  • Lower tax rates compensate
  • Only 80CCD(2) (employer NPS), 80JJA allowed

Summary

  • GTI: Sum of income from 5 heads (Salary + House + Business + Capital Gains + Other Sources)
  • Total Income: GTI - Chapter VI-A deductions (80C to 80U)
  • Tax applied on: Total Income (not GTI)
  • Major deductions: 80C (₹1.5L), 80CCD(1B) (₹50k), 80D (₹25-100k), 80E (no limit), 80G (donations)
  • Loss adjustment: House property/business loss reduces GTI directly
  • New regime: Most deductions not allowed, but lower tax rates

Quiz Time! 🎯

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Next Chapter: Incomes Exempt from Tax – Important Sections Overview! 🎁

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