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