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COMPUTATION OF TOTAL INCOME | CA IPCC TAX

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COMPUTATION OF TOTAL INCOME

Income-tax is charged on the Total Income of a Previous Year at the rates prescribed for the Assessment Year. ‘Assessment Year’ means the period of 12 months commencing on April 1, every year. ‘Previous Year’ is the financial year immediately preceding the assessment year.

A ‘resident’ tax payer is charged to income-tax on his global income, subject to a double taxation relief in respect of foreign incomes taxed abroad. In the case of a ‘non­resident’, income-tax is charged only on incomes received, accruing or arising in India or which are deemed to be received, accrued or arisen in India.

 

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For the purpose of computing total income and charging tax thereon, income from various sources is classified under the following heads:


A. Salaries
B. Income from House Property
C. Profits and Gains of business or profession
D. Capital Gains
E. Income from Other Sources

These five heads of income are mutually exclusive. If any income falls under one head, it cannot be considered under any other head. Income under each head has to be computed as per the provisions under that head. Then, subject to provisions of set off of losses between the heads of income, the income under various heads has to be added to arrive at a gross total income. From this gross total income, deductions under Chapter VIA are to be allowed to arrive at the total income.

See

On this total income tax is calculated at the rates specified in the relevant Finance Act or the rates given in the Income Tax Act itself [as in the case of long term capital gains]. From this tax, rebates and reliefs, if any, allowable under Chapter VIII are allowed to arrive at the total tax payable by the assessee.

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COMPUTATION OF TOTAL INCOME

The above procedure is summarized below:

Gross Total Income = A + B + C + D + E

Total Income = Gross Total Income — Deductions under chapter VIA

Total Tax Payable = Tax on Total Income — Rebates and reliefs under Chapter VIII

COMPUTATION OF TOTAL INCOME

COMPUTATION OF TOTAL INCOME
Particulars
a)      Income from Salaries
Basic Salary                                        
xx
Taxable Allowances                             
xx
Taxable Value of Perquisites                
xx
          Gross Salary                                          
xx
Less : Entertainment Allowance            
(xx)
           Professional Tax                                                
xx       
xx
 b)      Income From House Property
Gross Annual Value                             
xx
Less: Municipal Taxes paid                  
(xx)
            Annual Value                           
xx
Less: Deduction u/s 24                                       
(xx)      
xx
 c)      Profits and Gains of Business or Profession
      Net Profit as per P/L A/c                     
xxx
      Add: Amount shown as expenses but not allowed 
xx
xxx
      Less: Expenses allowed but not claimed.
(xx )
      Add: Incomes not shown in the P/L A/c but taxable   
xxx
      Less: Incomes shown in the P/L A/c but not taxable 
(xx)
xxx
d)      Capital Gains
Sale Consideration                               
xxx
Less: Expenses on transfer                   
(xx)
Net Sale Consideration            
xxx
Less: Cost of acquisition/improve.       
(xx)
            Capital Gains                           
xxx
Less: Exemptions (if any)
(xx)
  
xxx
e)      Income From Other Sources 
xx
Gross Total Income  
xxx
Less: Deduction u/s 80CCC to 80U 
(xx)
            Total Income  
xxx

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