Basic Concepts of Income Tax-III— Computation of Total Income

In continuation to our earlier two chapters on basic concepts of income tax now we will discuss about the Gross Total Income/Total Income (GTI/TI) and how it is computed. We will also discuss the steps required to reach at the level of under standing the exact meaning of Gross Total Income and tax payable thereon. Tax is payable on the total income earned by the assessee in the previous year and income has to be calculated by giving effect to the provisions of the Income Tax Act, 1961. The steps to be followed to calculate the tax on total income is as follows: –

• Computation of Total Income
• Determination of Residential Status
• Classification under different heads of Income viz. Salaries, Income From House Property, Income from Business/Profession, Capital Gains and Income From Other Sources
• Computation under each head after giving effect to the benefits available under each head e.g. section 24 of 30% rebate and interest benefit under the head income from house property
• Checking Applicability of Provisions of Clubbing of Income
• Allowing the benefit of set off/carrying forward of brought forward losses etc.
• Allowing Deductions available under Chapter VI-A of the Income Tax Act, 1961 e.g. LIC premium paid u/s 80-C or donation given u/s 80-G or deduction of saving interest income up to Rs. 10000 u/s 80TTA
• Computation of Total Income
• Computation of Tax at the applicable rates
• Calculation of Surcharge in case total income exceeds the limit prescribed for calculation of surcharge e.g. surcharge @ 10% is applicable for Individual/HUF/AOP/BOI if the total income total income exceeds Rs. 50.00 Lacs and rate of surcharge increases to 15% if the total income exceeds Rs. 100.00 Lacs
• Calculation of allow-ability of rebate available u/s 87A (applicable only in case of individual having total income below Rs. 3.50 Lacs
• Charging of Health and Education Cess on the total Tax Calculated above @ 4% of the total tax as calculated above (TAX plus Surcharge minus Rebate, if applicable)
• Allowing the benefit of Tax Deducted at Source (TDS) (by checking the Form 26AS for the said Assessment Year)
• Allowing the benefit of Advance Tax (by checking the Form 26AS for the said AY)
• Calculate the Balance Tax Payable/Refundable and if payable then
• Calculate the interest payable u/s 234A/B/C
• Determine the Final Tax Payable
• Pay the tax as Self-Assessment Tax

After calculating the total income of the assessee a return needs to be filed with department of income tax in the prescribed form of filing of return and these forms are being notified by the Central Board of Direct Taxes (CBDT) each year. These forms notified by the departments contains complete details of the assessee starting from the Name, Father name, DOB, Address, PAN, Aadhar, income details under various heads of the income, TDS/Advance tax in case of individual assessee and partners/directors details, profit sharing/shareholding details etc in case of non-individual assessee. These returns needs to be filed before the due date of filing the return prescribed u/s 139(1) of the Income Tax Act, 1961 which is 31st July in case of non-corporate assessee and not having tax audit and it is 30th September in case of corporate and audit assessee (any business having turnover of over Rs. 100.00 Lacs and Rs. 50.00 Lacs in case of Professionals)

Different forms are being prescribed by the department for filing of return by different assessee and at the time of notifying the forms department also notifies who is liable to file his return in which form e.g. for AY 2019-20 form ITR-1 (Sahaj) can only be used by Individuals being a resident (other than not ordinary resident) having total income up to Rs. 50.00 Lacs, having Income from Salaries, one house property, other sources and agricultural income up to Rs. 5000/-). Important point to note here that any individual who is a director in any company or having any investment in equity shares of any unlisted company.