Kotak e-Term Plan
Kotak e-Term Plan provides a high level of protection to your loved ones in your absence.
Kotak Guaranteed Savings Plan
Kotak Guaranteed Savings Plan is a savings and protection plan that helps you achieve long-term financial goals and provides an insurance cover against any eventuality.
Kotak e-Invest plan is a complete Unit-Linked Insurance Plan that can be customized as per your goals and needs.
Kotak Health Shield
Kotak Health Shield Plan helps secure your finances in sudden medical expenses such as Cardiac, Liver, Neuro, and Cancer (all early and significant illness stages/conditions of cancer), along with offering protection for personal accidents - in case of accidental death or disability.
Kotak Lifetime Income Plan
Kotak Lifetime Income Plan gives you the security of your income continuing throughout your life and in your absence throughout your spouse's lifetime!
Income tax calculation appears baffling to many taxpayers due to the various jargons involved. But if your annual earnings fall under the taxable income slabs, you need to pay the correct tax amount to avoid penalty charges.
However, the first step to compute your payable tax is to know your gross income and your total taxable income. It also helps in tax-planning with tax-savings instruments, and claiming deductions and exemptions to reduce your tax burden.
If the two terms confuse you, read on to understand how the two differ.
What is gross income?
It is the total amount you earn in a financial year. As per the Income Tax Act (ITA), 1961, you can earn income from different sources, termed as income heads. Your gross income is the aggregate of your earnings under all those heads, including:
As per Section 80B(5) of the ITA, gross income includes adjustments for set-off and carry-forward profits or losses from preceding years..
How to calculate gross income?
1. Identify your residential status: Your residential status decides the earnings you are to include in your taxable income.
2. Classify your income: Categorize your earnings under the five income overheads:
3. Calculate the amount earned from each head: For this, you need to be aware of the tax-exempt income types, like agricultural income. You
do not have to include those earnings into your gross income.
Club your income: You must include in your gross income some types of income your spouse or minor child earns, as per the tax laws.
4. Set-off and/or carry forward losses: Some income heads can include various income sources. You might receive profits from one source
while incurring losses from another under the same head. You can set off losses from one source against the gains from another. The tax rules also allow
inter-head adjustment of such losses and profits. Moreover, you can apply previous years’ losses to the current year’s income to reduce your tax liability.
5. Compute your total gross income: The final figure obtained from the previous steps’ calculations gives your gross income.
What is total income?
Total income or net income is the amount left from your gross income after taking out all deductions allowed under the ITA.
It is the taxable part of your income; your tax liability depends on this amount.
How to calculate total income?
Section 2(45) of the ITA defines total income, and the scope is defined by Section 5.
The steps to calculate your total income are as follows:
1. Deduct the following from your gross income:
○ cooperative society revenues
○ royalty for specific books
○ royalty on patents
○ profits from infrastructure developing enterprises
○ gains from enterprises concerned with the development of defined economic zones
2. Round it off:
After you find out your total income by claiming relevant deductions from your gross income, you have to round it off to the nearest multiple of 10.
According to Section 288A, you have to take the following factors into account:
First, ignore any paisa. If your total income amount comes to ₹5,76,897.50, you have to take it as ₹5,76,897 only.
After that, if the last digit in the figure is five or more, increase the amount to the closest higher sum that is a multiple of ten. In this case, your income became ₹5,76,897. Hence, you have to take it as ₹5,76,900.
But, if the last digit in the figure is less than 5, you have to reduce the amount to the nearest lower amount, a multiple of ten. Therefore, if your income after ignoring paisa is ₹5,76,892, you have to consider it as ₹5,76,890.
3. Apply surcharges and Cess:
Your total income is the basis for determining the tax amount you need to pay. You can calculate the tax as per the rate applicable to your income slab. Then, take away rebates, if any. Finally, add the relevant surcharges and Cess to get the amount you need to deposit with the tax department.
Gross Income vs Total Income: Key Differences
|Parameter||Gross Income||Total/ Net Income|
|Meaning||An assessee’s overall income calculated under all five income source heads as per the ITA, after applying clubbing rules and set off of losses||The income amount used to calculate an assessee’s payable tax amount.|
|Equals to||The entire income earned in a financial year before claiming deductions under Chapter VI-A||Gross income – deductions under Section 80 (80C to 80U) = Total income|
|Tax treatment||Tax is not levied on it.||Income tax is payable on this sum.|
What are the deductions available under Section 80 of Chapter VI of the ITA?
80C: Expenses and investments up to ₹1.5 lakhs,including:
80CCD: Contribution in National Pension System up to ₹50,000 over and above 80C deductions
80D: Expenses towards health insurance premiums, up to Rs. 25,000 if you are under 60 years of age, and up to ₹50,000 for senior citizens
80TTA: Interest earned on your savings account, up to ₹10,000
80E: Interest paid on education loan
80EE: Interest on a home loan, over and above Section 24 deductions, if applicable
80GG: Exemption on house rent if your salary component does not include HRA
80DDB: Medical expenses up to ₹40,000 (or ₹1,00,000 for senior citizen patients) towards specific ailments
80G: Charitable donations
80U: Deductions for taxpayers suffering from a physical disability
How to reduce your total taxable income without affecting your gross income and save on tax?
The government permits several deductions and exemptions on your gross income to reduce your taxable income. Among the deductions you can claim, the largest, up to ₹1.5 lakhs, is available under Section 80C. You can invest in various lucrative savings and investment schemes to avail of the 80C deductions and save on tax.
However, you should not select your investment tools based on tax-saving goals only. The investment avenues should also help fund your life goals. Moreover, you should also plan to safeguard your financially dependent family from a shortage of funds resulting from life’s uncertainties.
Among the 80C tax-saving instruments, life insurance plans offer the unique advantage of combining life cover with savings and investment. The different product categories include:
Kotak Life offers a wide range of life insurance plans to meet all such investment and protection goals. You can get instant quotes on the premium payable, calculate the tax benefit you can avail with the plan, and buy online.
Although gross income and total income sound like similar terms, the two are not interchangeable. Income tax applies only to the latter. With careful tax planning and investments in tax-savings schemes, you can reduce your total income and lower your income tax outgo.