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Gross Income

Updated on July 18, 2023

Gross income refers to the total income earned by an individual or business before any deductions or expenses are subtracted. It includes income from all sources, such as salaries, wages, business profits, rental income, interest, dividends, and capital gains.

Points to consider while understanding gross income

Inclusions – Gross income in India includes income from all taxable sources, such as salary, wages, business profits, rental income, interest, dividends, capital gains, and other sources specified by the Income Tax Act.

Exclusions – Certain types of income may be exempt from taxation and not considered part of gross income, such as agricultural income, dividends from mutual funds, long-term capital gains from the sale of listed securities, and specific government-approved exemptions.

Reporting on tax returns – Taxpayers in India are required to report their gross income on their income tax returns, providing detailed information about the various sources and categories of income.

Deductions and exemptions – From the gross income, individuals can claim deductions and exemptions as per the provisions of the Income Tax Act to arrive at the taxable income.

Documentation – Taxpayers should maintain proper documentation and records of their income sources, including salary slips, bank statements, rental agreements, business accounts, and investment statements, to support the calculation of gross income.

Importance in tax calculations – Gross income forms the basis for calculating taxable income, and it determines the applicable tax rates and slabs for an individual or business.

Compliance and disclosure – Accuracy and proper disclosure of gross income is essential to ensure compliance with tax laws, avoid penalties, and maintain transparency in financial affairs.