Question

Q2: Explain the following:

a) Total Income

b) Net Income

c) Taxable Income.

(Marks – 15)

(Marks – 15)

Answer 1

Q2:

a: Total Income: Total income is the gross total income received from all 5 available income sources which a person earns with in a financial year.This income are from income from salaries, income from house property, income from business and profit, income from capital gain, income from other sources.

It is called gross total income of a person

b: Net income: Net income is the income is the income arrieved after certain deductions from income taxes and taxes paid to government.

Let say suppose a person has $ 100000 total gross income per year. He has $ 20000 deductions qualifies under income tax and paid $10000 as income taxes,

So his Net income will be:- $100000 - $20000-$10000 = $70,000.

c: Taxable income:- It is the income on which income tax is levied. Some deductions, reliefs from income taxes and exemptions are granted to tax payer for it.

Taxable income calculation purpose we have to calculate first gross income from five heads of income available with in a fiancial year.

Example; For tax paying year or assesment year 2020, income earned by person is taken for year 2019 and 20, for 2021, income earned will be taken 2020-21 and so on.

5 heads of incomes under income tax act are as follows:-

- Income from salary

- income from busisness and profession

- income from capital gain

- income from house property

- incomer from other sources

Taxable income is calculated for an individual, for a corporate, for HUF hindu undivided family, for a trust, for a legal enttity etc.

There is a income tax slab applicable for certain range of taxable income decided by income tax of a country. It varies from country to country as income tax rule varies.

In india for taxable income below rs 2,50,000 tax is nil

for income between rs. 250000 - Rs 500000 tax is 10%

For income between Rs. 500000 - Rs 1000000 tax is 20% and above Rs 10,000000 tax is 30%