What is taxable income?
Reviewed by Ranga & Company
Taxable income: Taxable income is the part of your income on which tax is actually calculated: gross total income from all five heads, minus the deductions allowed under your tax regime.
At a glance
- Formula
- Gross total income − deductions (Chapter VI-A and others)
- Five heads
- Salary, house property, business/profession, capital gains, other sources
- Rounding
- Rounded off to the nearest ₹10
- Not included
- Exempt income such as agricultural income, PPF interest and specified allowances
Gross total income vs taxable income
| Step | What happens |
|---|---|
| Income under each head | Salary after standard deduction, rent after 30% deduction, business profit, gains, interest |
| Clubbing and set-off | Add income clubbed from spouse or minor children; set off allowed losses |
| Gross total income | The total after set-off |
| Deductions | 80C, 80D, 80G and others in the old regime; mainly employer NPS in the new regime |
| Taxable income | What tax rates are applied to |
Special-rate income
Some income is part of taxable income but taxed at fixed rates instead of slabs: for example short-term gains on listed shares (20%) and long-term capital gains (12.5%). These are shown separately in the return.
Common mistakes
- Leaving out bank interest, dividends and capital gains reported in AIS
- Claiming old-regime deductions like 80C while filing under the new regime
- Not clubbing income from investments made in a spouse's name
Frequently asked questions
Is taxable income the same as salary?
No. Taxable income includes every head of income and is reduced by exemptions and deductions, so it is usually different from your salary.
Does exempt income count in taxable income?
No. Exempt income such as agricultural income or PPF interest is left out, though some of it must still be reported in your return.
Is taxable income rounded?
Yes. Total income is rounded off to the nearest multiple of ₹10 before tax is calculated.
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