This story is from July 2, 2018

How to calculate taxable income?

How to calculate taxable income?
NEW DELHI: To find out how much tax will be deducted from your income, first you need to know how to compute your total taxable income. Once you know your total taxable income, you can easily find out the final tax payable or refundable by applying the applicable tax rates in force and then deducting taxes already paid such as TDS/TCS or Advance tax.
So let's find out how to calculate your total taxable income:
The income tax law defined 5 primary sources of income for an individual - 1) Income from salary, 2) Income from House Property, 3) Income from Business or Profession, 4) Income from Capital Gains, and 5) Income from Other sources.

Thus, you income should also be categorized in the above format:
1) Income from Salary
Taxable income from salary can be easily computed using TDS certificate in Form 16 issued by the employer. Add your salary slip components such as basic salary, DA, TA, DA on TA, HRA, all other allowances, and reimbursements and Form 16 (Part B). Also add any variable or bonus credited in your account. This will be your gross salary.
Now deduct exempted portion of HRA, transport allowance, all medical, communication and conveyance reimbursements subject to the furnishing of actual bills from gross salary. The result will be your net income from salary.

2) Income from House Rent
Another source of income is from house property such as rental income. In case, you have only one house and that too is self occupied, then also you will be required to compute your income from house property. You can file it as nil or a negative value in most cases.
3) Income from Capital Gains
Income from Capital Gains are calculate for Long term capital gains (LTCG) from sale of all capital assets. Calculating income from capital gains involves some effort depending on the number and complexity of transactions; hence you might need help of an expert to calculate the same. You can claim the deductions under section 54, 54G, 54EC etc. if any.
4) Income from Business/Profession
It's best to take help from experts such as chartered accountant to calculate taxable income arising from gains from Business/ Profession. There several provisions under the Income Tax Act which deal with the allowance/disallowances of various expenditures and incomes. Other concepts like AMT, Book Profits, and Presumptive incomes are also applicable while computing gains from a Business/Profession.
5) Income from Other Sources
Income from any other sources such as Interest Income, Dividend income, Taxable Gifts etc. can be filed as the Income from Other Sources. You can figure out these from the credit entries in your savings account passbook/statements. You can subtract the deductions available under Income Tax act for which you are eligible.
Your gross total income will be the sum of income from all 5 heads mentioned above after setting off the losses under the relevant heads of income.
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