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In our previous article How to calculate Income Tax, We have depicted the calculation of Income Tax. We have received 1000s of comments on the article with appreciation. We are glad to know that you are benefitted from the article. In this article we are elaborating the topic by including the calculation of Gross total income (GTI), Net income, Tax Deductions, etc.
Income tax calculation is one of the easiest as well as toughest job a person needs to do. Easy in the sense all you need to do here is calculate your taxable income and find out the tax liability according to tax slabs and tough in a way that there are every chances that a person will commit mistakes while calculating his tax liability though he knows what is his income, investments and tax slab under which he falls. Then how to calculate the tax effectively and be error free and what are the things that an assessee needs to consider while calculating tax liability?
The income tax that a person needs to pay is calculated from the Net income or Taxable income. You can get this taxable income once you deduct all the deductions which come under section 80 from gross total income. Hence the first step in calculating the income tax would be to calculate gross total income.
Gross total income is calculated by taking into consideration five heads of income they are
Add up incomes from each head to get gross total income. For most of assessees they will be having income from all the heads of income except third one or income from business or profession. Once you get the gross total income all you need to do is deduct all the exemptions so as to get the taxable income.
Mr. X has an annual income of Rs 5,00,000. He has a house from which he has obtained income of 80,000 rupees. He also has earned about 70,000 rupees from other sources. His gross total income would be
GTI= income from salary + income from house property + income from other sources
Mr. Y is a government worker with annual income of rupees 3,45,000. He also has a house property which earns him an annual income of rupees 38,000. He also has got capital losses to the tune of 20,000 rupees. Income from other sources amounts to 20,000 rupees. His gross total income is
GTI= income from salary+income from house property+income from other sources
In this case you may think that I forgot to deduct the capital loss but the fact is that the capital losses cannot be deducted under any heads of income but carried forward. Capital loss is deducted from capital gains during next assessment year.