The Sum of Various Heads of Income is Called: Gross Total Income Explained

The sum of various heads of income is called Gross Total Income (GTI). This figure represents the total earnings of a person in a financial year before any tax deductions are made. Under the Income Tax Act, all income is sorted into five categories, or heads. This article explains what Gross Total Income is, how the 5 heads of income build it, and how it is different from the total income you pay tax on.

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Table of Contents

• What is Gross Total Income (GTI) as per the Income Tax Act?

• The 5 Heads of Income That Form Gross Total Income

• How to Calculate Gross Total Income: A Step-by-Step Example

• Gross Total Income vs. Total Income: What’s the Key Difference?

• Why Understanding Your Gross Total Income is Important

• Conclusion: Key Takeaways

• Frequently Asked Questions (FAQ)

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What is Gross Total Income (GTI) as per the Income Tax Act?

Gross Total Income is a crucial figure in tax calculations. The Income Tax Act, 1961, formally defines GTI in Section 80B(5). It states that GTI is the total income calculated by following the Act's provisions before any deductions under Chapter VI-A are made. This means it's the complete sum of your earnings from all sources.

As per Section 80B(5) of the Income Tax Act, 1961: Gross Total Income is the total income computed according to the Act's provisions, but before making any deductions available under Chapter VI-A (like those under Section 80C).

Simply put, the gross total income definition refers to the grand total you get when you add up all your money from the five main income categories. It’s the initial, unadjusted total of your earnings for the year. This amount includes incomes that might be clubbed together (like a minor child's income) and adjusts for any losses carried forward from previous years.

The 5 Heads of Income That Form Gross Total Income

The 5 heads of income are mandated by Section 14 of the Income Tax Act. This rule requires every taxpayer to classify their earnings into specific categories. This classification is the foundation for calculating your final tax liability. The sum of the incomes calculated under these five heads gives you the Gross Total Income.

The five heads are:

• Income from Salaries

• Income from House Property

• Profits and Gains of Business or Profession (PGBP)

• Income from Capital Gains

• Income from Other Sources

1. Income from Salaries

Income from salary includes all payments you get from an employer for your services. This is more than just your basic pay. It covers various components of your compensation package.

The key salary components are:

• Basic Salary

• Allowances (like House Rent Allowance and Leave Travel Allowance)

• Bonuses and commissions

• Perquisites (non-cash benefits like a company car)

• Pension

From this total, a standard deduction of ₹50,000 is allowed, which helps lower the taxable amount.

2. Income from House Property

Income from house property relates to the earnings you make from a property you own. This most commonly refers to the rental income you receive when you let out a house, apartment, or commercial space. To calculate this income, you start with the Gross Annual Value (GAV), which is the higher of the rent you receive or the property's fair market rent. From this, you can deduct municipal taxes to arrive at the Net Annual Value (NAV). A standard deduction of 30% on the NAV is also permitted for upkeep expenses.

3. Income from Business or Profession

The income from business or profession head covers earnings from any trade, commerce, manufacturing activity, or professional service. If you are a doctor, lawyer, freelancer, or run your own shop, your earnings fall into this category, often called PGBP. The taxable amount is the net profit, which you find by subtracting all eligible business expenses (like rent, employee salaries, and material costs) from your total revenue.

4. Income from Capital Gains

Income from capital gains arises when you sell a capital asset and make a profit. Capital assets include things like property, stocks, mutual funds, and gold. These gains are categorized based on how long you owned the asset.

• Short-Term Capital Gains (STCG): Profit from selling an asset held for a short period (e.g., stocks held for less than 12 months).

• Long-Term Capital Gains (LTCG): Profit from selling an asset held for a longer duration.

For more information, see this detailed guide on Capital Gains.

5. Income from Other Sources

The income from other sources category is for any income that does not fit into the first four heads. It's a residual category that ensures all earnings are accounted for. Common examples include:

• Interest earned from savings accounts and fixed deposits (FDs).

• Dividends received from company shares.

• Winnings from lotteries, game shows, or horse races.

• Gifts received that are valued above ₹50,000.

How to Calculate Gross Total Income: A Step-by-Step Example

You can how to calculate gross total income by following a clear formula. The gross total income formula is simply the sum of the net income figures from each of the five heads, after making adjustments for clubbing of income and setting off losses.

Formula: GTI = Income from Salary + Income from House Property + PGBP + Capital Gains + Income from Other Sources

Let's use a GTI calculation example for the Assessment Year (AY) 2025-26. Meet Mr. Sharma.

Income Source	Amount (₹)	Relevant Head	Calculation Notes
Salary from Employer	9,50,000	Income from Salaries	Gross salary received.
Standard Deduction	(50,000)	Income from Salaries	Flat deduction allowed on salary.
Net Salary Income	9,00,000
Rent from a Property	3,00,000	Income from House Property	This is the Gross Annual Value.
Municipal Taxes Paid	(20,000)	Income from House Property	Deducted to get Net Annual Value (NAV) of ₹2,80,000.
Standard Deduction (30%)	(84,000)	Income from House Property	30% of NAV (₹2,80,000).
Net House Property Income	1,96,000
Profit from Freelance Work	2,00,000	PGBP	Net profit after all business expenses.
PGBP Income	2,00,000
Short-Term Capital Gain	50,000	Capital Gains	From selling shares.
Capital Gains Income	50,000
Interest from FDs	25,000	Income from Other Sources	Taxable interest income.
Income from Other Sources	25,000
Gross Total Income (GTI)	13,71,000	Total of all heads	(9,00,000 + 1,96,000 + 2,00,000 + 50,000 + 25,000)

Example:

Step	Description
Box 1	All Income Sources (e.g., Salary, Rent, Interest)
Box 2	Classify income into the 5 Heads of Income
Box 3	Compute Gross Total Income (GTI) = Sum of all heads
Box 4	Subtract Deductions under Sections 80C to 80U
Box 5	Arrive at Final Taxable Income

Gross Total Income vs. Total Income: What's the Key Difference?

The difference between gross total income and total income is a frequent point of confusion, but it's quite simple. Gross Total Income (GTI) is the sum of your earnings before any deductions under Chapter VI-A of the Income Tax Act are applied. In contrast, Total Income (also called taxable income) is the amount that remains after you subtract these deductions. You pay tax on your Total Income, not your GTI.

Here is a table to highlight the GTI vs total income comparison:

Basis of Difference	Gross Total Income (GTI)	Total Income
Definition	The sum of all income from the five heads before any deductions.	The income that remains after subtracting eligible deductions from GTI.
Calculation	Income from all five heads are added up.	GTI - Deductions under Chapter VI-A (Sections 80C to 80U).
Deductions	No deductions from Chapter VI-A (like 80C, 80D) are applied.	All eligible deductions are subtracted from GTI to arrive at this figure.
Purpose	It's the starting figure for calculating your tax liability.	This is the final figure on which income tax is actually calculated and paid.

For a better understanding of what you can subtract, you can review the various deductions under Chapter VI-A.

Why Understanding Your Gross Total Income is Important

The importance of GTI is central to your tax responsibilities. Your Gross Total Income is the first and most critical step in calculating how much tax you owe. It serves as the baseline from which all further calculations, like tax deductions and final liability, are made.

Here are a few key reasons why understanding your gross total income in ITR filing is essential:

• Starting Point for Tax Calculation: GTI is the foundation for computing your taxable income. You cannot determine your tax liability without first calculating your GTI correctly.

• Foundation for Tax Planning: Knowing your GTI allows you to plan your taxes effectively. You can see how much you've earned and then figure out the best ways to use deductions under sections like 80C and 80D to reduce your taxable income.

• Required for ITR Filing: You must report your Gross Total Income accurately when filing your Income Tax Return. It is a mandatory field in the ITR form.

• Links to Deduction Limits: Some deductions have limits that are tied to your GTI. For instance, the limit for certain donations under Section 80G depends on the Adjusted Gross Total Income (AGTI), which is derived from your GTI.

Conclusion: Key Takeaways

This gross total income summary should clarify its role in your finances. Understanding this concept is the first step toward mastering your taxes and filing them accurately.

Here are the essential points to remember:

• GTI is the total of your earnings from the five heads of income before any deductions.

• The five heads are Salaries, House Property, Business/Profession, Capital Gains, and Other Sources.

• Taxable income calculation begins with GTI.

• GTI minus deductions under Chapter VI-A equals your Total Income, which is the amount you pay tax on.

Calculating income and filing taxes can feel complicated. For accurate and hassle-free tax filing, consider using Taxbuddy's expert services to ensure everything is handled correctly.

Frequently Asked Questions (FAQ)

What is the simple formula for Gross Total Income?

The formula is: GTI = Income from Salaries + Income from House Property + Profits and Gains of Business or Profession + Capital Gains + Income from Other Sources.

Is Gross Total Income the same as CTC?

No, they are different. CTC (Cost to Company) includes components like your EPF contribution, which are not part of your take-home pay or GTI. GTI is your gross earnings as defined by tax laws.

Is tax calculated on Gross Total Income or Total Income?

Tax is calculated on Total Income. Total Income is what you get after subtracting eligible deductions (from Chapter VI-A) from your Gross Total Income.

Which IT section defines Gross Total Income?

Section 80B(5) of the Income Tax Act, 1961, defines Gross Total Income.

Can the same income be taxed under two different heads?

No, the Income Tax Act clearly separates income into five heads, and a single source of income can only be taxed under one specific head.

What are the 5 heads of income as per Section 14?

The five heads are: Income from Salaries, Income from House Property, Profits and Gains of Business or Profession, Capital Gains, and Income from Other Sources.

What is Adjusted Gross Total Income (AGTI)?

Adjusted Gross Total Income is calculated by making specific adjustments to the GTI. It's mainly used to determine the deduction limit for certain expenses, like donations under Section 80G. It's your GTI minus certain deductions, like long-term capital gains.

Are deductions under Section 80C subtracted from Gross Total Income?

Yes, deductions under Section 80C and other sections in Chapter VI-A are subtracted from Gross Total Income to arrive at your Total (Taxable) Income.

Where can I find Gross Total Income in my ITR form?

In standard ITR forms, the Gross Total Income is shown after the detailed computation of income from all five heads and before the section for deductions under Chapter VI-A.

Do I need to include exempt income in my Gross Total Income?

No, exempt income, like earnings from a Public Provident Fund (PPF) or agricultural income, is not included in the calculation of Gross Total Income.