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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



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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.

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. 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
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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