{"id":12546,"date":"2026-03-03T04:23:31","date_gmt":"2026-03-03T04:23:31","guid":{"rendered":"https:\/\/goldenpi.com\/blog\/?p=12546"},"modified":"2026-04-03T04:24:59","modified_gmt":"2026-04-03T04:24:59","slug":"what-is-taxable-income-and-how-to-calculate","status":"publish","type":"post","link":"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/","title":{"rendered":"Taxable Income: What it is, and How to Calculate"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">If the income you earn during a financial year is above a certain limit, you must pay income tax. That said, not everything you earn is taxed. So then, how much of what you earn is actually taxable?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Here\u2019s where the concept of taxable income comes in. Whether you\u2019re a salaried employee, a freelancer, or a business owner, this guide can help you understand taxable income and how to calculate it.<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_79_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#What_is_Taxable_Income\" >What is Taxable Income?\u00a0\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#What_are_the_Taxable_Sources_of_Income\" >What are the Taxable Sources of Income?\u00a0<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#1_Salary\" >1. Salary\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#2_House_Property\" >2. House Property<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#3_Profits_and_Gains_from_Business_or_Profession\" >3. Profits and Gains from Business or Profession<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#4_Capital_Gains\" >4. Capital Gains<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#5_Other_Sources\" >5. Other Sources<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#Old_Income_Tax_Regime_vs_New_Income_Tax_Regime\" >Old Income Tax Regime vs. New Income Tax Regime\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#Step-By-Step_Guide_on_How_to_Calculate_Taxable_Income\" >Step-By-Step Guide on How to Calculate Taxable Income<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#Step_1_Identify_the_Heads_of_Income_Applicable_to_You\" >Step 1: Identify the Heads of Income Applicable to You<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#Step_2_Calculate_Income_from_all_Heads_Individually\" >Step 2: Calculate Income from all Heads Individually<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#Step_3_Add_the_Incomes_from_all_the_Applicable_Heads\" >Step 3: Add the Incomes from all the Applicable Heads\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#Step_4_Choose_an_Income_Tax_Regime\" >Step 4: Choose an Income Tax Regime\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#Step_5_Opt_for_the_Tax_Deductions_According_to_the_Chosen_Income_Tax_Regime\" >Step 5: Opt for the Tax Deductions According to the Chosen Income Tax Regime<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#Step_6_Compute_the_Taxable_Income\" >Step 6: Compute the Taxable Income\u00a0<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#Lower_Your_Taxable_Income_With_Smart_Investments\" >Lower Your Taxable Income With Smart Investments<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#FAQs_on_Taxable_Income\" >FAQs on Taxable Income<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#1_What_is_taxable_income\" >1. What is taxable income?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#2_What_is_the_difference_between_gross_income_and_taxable_income\" >2. What is the difference between gross income and taxable income?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#3_What_heads_of_income_are_included_under_taxable_income\" >3. What heads of income are included under taxable income?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#4_How_can_I_reduce_my_taxable_income\" >4.\u00a0 How can I reduce my taxable income?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/what-is-taxable-income-and-how-to-calculate\/#5_Are_the_maturity_proceeds_from_a_life_insurance_policy_taxable\" >5. Are the maturity proceeds from a life insurance policy taxable?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_is_Taxable_Income\"><\/span><b>What is Taxable Income?\u00a0\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Taxable income is the portion of income you earn during a financial year on which income tax is levied. It essentially determines how much tax you pay during a year. The higher your taxable income is, the more income tax you must pay.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Your taxable income for a financial year is calculated by taking all of the income you earned across all sources and subtracting eligible exemptions and deductions. The resulting figure is then used to calculate your final tax liability for the year.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_are_the_Taxable_Sources_of_Income\"><\/span><b>What are the Taxable Sources of Income?\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Under the Income Tax Act, 1961, income is classified into five distinct heads. Here\u2019s a detailed overview of the five taxable sources of income.\u00a0\u00a0<\/span><b><\/b><\/p>\n<h3><span class=\"ez-toc-section\" id=\"1_Salary\"><\/span><b>1. Salary\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The income you receive from your employer in exchange for your services is classified as salary income. Salary income includes the following components:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Basic pay<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Dearness allowance (DA)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">House Rent Allowance (HRA)\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Leave Travel Allowance (LTA)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Other allowances<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Bonuses\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Commissions<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Perquisites\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Some allowances, like dearness allowance, are fully taxable. Meanwhile, certain allowances like HRA and LTA could be:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Fully exempt from tax\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Partially taxable\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Fully taxable<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"2_House_Property\"><\/span><b>2. House Property<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The income you earn by renting a house or a property is classified as house property income. To calculate the taxable house property income for a particular year, you can use the following formula.<\/span><\/p>\n<div class=\"pcrstb-wrap\"><table>\n<tbody>\n<tr>\n<td><b>Particulars<\/b><\/td>\n<td><b>Amount (<\/b><span style=\"font-weight: 400;\">\u20b9)<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Gross Annual Value (GAV)\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">XXXX<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">(-) Municipal Taxes Paid<\/span><\/td>\n<td><span style=\"font-weight: 400;\">(XXXX)<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Net Annual Value (NAV)<\/b><\/td>\n<td><b>XXXX<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">(-) 30% Standard Deduction\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">(XXX)<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">(-) Home Loan Interest Payments<\/span><\/td>\n<td><span style=\"font-weight: 400;\">(XXX)<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Taxable House Property Income\u00a0<\/b><\/td>\n<td><b>XXXX<\/b><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p><span style=\"font-weight: 400;\">Here, the gross annual value is taken as the higher of the following:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Expected annual rental income for your property\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Municipal annual rent for your property<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Fair annual rent for your property<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Actual annual rent received for your property\u00a0<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"3_Profits_and_Gains_from_Business_or_Profession\"><\/span><b>3. Profits and Gains from Business or Profession<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The income you earn through your business or profession is classified under this head. The taxable component is determined by taking all of the receipts directly connected to your business or profession and subtracting allowable expenses. Some expenses that can be deducted include:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Rent<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Salaries<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Utilities<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Depreciation<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Marketing costs<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Other operational costs<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"4_Capital_Gains\"><\/span><b>4. Capital Gains<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The profit you earn by selling an asset is classified as capital gains. The gains are classified into either long-term capital gains (LTCG) or short-term capital gains (STCG),\u00a0 based on how long you held the asset before selling.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Short-term capital gains are added to your taxable income and are taxed at the slab rate applicable to you. The only exception is STCG from equity shares and equity mutual funds. They are taxed at a flat rate of 20%.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Long-term capital gains above \u20b91.25 lakh in a financial year are taxed at a flat rate of 12.5% with no indexation benefits.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"5_Other_Sources\"><\/span><b>5. Other Sources<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The incomes that cannot be classified under the above four heads are covered under other sources. Some of the types of income that are classified under other sources include:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Interest from savings bank accounts\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Interest from recurring or fixed bank deposits<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Dividends<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Family pension\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Lottery or game winnings<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Gifts worth more than \u20b950,000 from non-relatives<\/span><\/li>\n<\/ul>\n<p><b>Note:<\/b><span style=\"font-weight: 400;\"> While most of these incomes are taxed normally, the income from lottery or game winnings is taxed at a flat rate of 30%.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Old_Income_Tax_Regime_vs_New_Income_Tax_Regime\"><\/span><b>Old Income Tax Regime vs. New Income Tax Regime\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The Income Tax Act, 1961, gives you the freedom to choose between two tax systems: the old regime and the new regime.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Here\u2019s a table outlining the differences between these two income tax regimes.\u00a0<\/span><\/p>\n<div class=\"pcrstb-wrap\"><table>\n<tbody>\n<tr>\n<td><b>Parameters<\/b><\/td>\n<td><b>Old Income Tax Regime<\/b><\/td>\n<td><b>New Income Tax Regime<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Introduction<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Pre-existing regime<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Introduced in Budget 2020\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Basic Exemption Limit<\/span><\/td>\n<td><span style=\"font-weight: 400;\">\u20b92.5 lakh for taxpayers below 60 years<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u20b93 lakh for taxpayers above 60 years but below 80 years<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u20b95 lakh for taxpayers above 80 years of age<\/span><\/td>\n<td><span style=\"font-weight: 400;\">\u20b94 lakh for all taxpayers<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Tax Rates<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Significantly higher compared to the new regime<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Much lower compared to the old regime<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Maximum Rebate u\/s 87A<\/span><\/td>\n<td><span style=\"font-weight: 400;\">\u20b912,500 (for taxable incomes up to \u20b95 lakh)<\/span><\/td>\n<td><span style=\"font-weight: 400;\">\u20b960,000 (for taxable incomes up to \u20b912 lakh)\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Deductions Available<\/span><\/td>\n<td>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">House rent allowance<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Leave travel allowance<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Entertainment allowance<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Professional tax<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Standard deduction on salary (\u20b950,000)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Home loan interest deduction (available for both self-occupied and let-out properties)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Investment deductions u\/s 80C (up to \u20b91.5 lakh)\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Health insurance premium deduction u\/s 80D<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Employee\u2019s contribution to pension fund (NPS) u\/s 80CCD(1)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Employer\u2019s contribution to pension fund (NPS) u\/s 80CCD(2)\u00a0\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Education loan u\/s 80E<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Disability deduction u\/s 80U<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Donations u\/s 80G and 80GGC<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Agniveer fund u\/s 80CCH<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Family pension deduction (up to \u20b915,000)<\/span><\/li>\n<\/ul>\n<\/td>\n<td>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Standard deduction on salary (\u20b975,000)\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Home loan interest deduction (available only for let-out properties)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Employer\u2019s contribution to pension fund (NPS) u\/s 80CCD(2)\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Agniveer corpus fund u\/s 80CCH<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Family pension deduction (up to \u20b925,000)<\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<p><b>Note:<\/b><span style=\"font-weight: 400;\"> The <\/span><a href=\"https:\/\/www.incometax.gov.in\/iec\/foportal\/help\/individual\/return-applicable-1#:~:text=The%20Finance%20Act%202024,to%20old%20tax%20regime.\"><span style=\"font-weight: 400;\">Finance Act 2024<\/span><\/a><span style=\"font-weight: 400;\"> has made the new tax regime the default option for all taxpayers from assessment year (AY) 2024-2025 onward. This means that the new tax regime will be automatically selected when filing your income tax returns. If you wish to be taxed under the old tax regime, you can choose to opt out.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Step-By-Step_Guide_on_How_to_Calculate_Taxable_Income\"><\/span><b>Step-By-Step Guide on How to Calculate Taxable Income<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">You might find the process of calculating your taxable income a little complex. To help you understand it easily, we\u2019ve broken it down into clear, actionable steps. When you follow the steps outlined below, you can compute your taxable income quickly without any errors.\u00a0\u00a0\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Step_1_Identify_the_Heads_of_Income_Applicable_to_You\"><\/span><b>Step 1: Identify the Heads of Income Applicable to You<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The first step is to find out which of the five heads of income apply to you. For example, let\u2019s say that you are a salaried employee with rental income and bank deposits. In this case, the following heads of income would apply to you:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Salary<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">House Property<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Other Sources\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">This step is very important because it makes sure you don\u2019t miss reporting any source of income.\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Step_2_Calculate_Income_from_all_Heads_Individually\"><\/span><b>Step 2: Calculate Income from all Heads Individually<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Once you\u2019ve identified the applicable sources of income, you must calculate the income from each head individually. When computing income, remember to account for the relevant deductions for each head.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For calculating taxable salary income, you must deduct HRA, LTA, and standard deduction. Similarly, make sure to deduct municipal taxes, home loan interest payments, and 30% standard deduction for computing taxable house property income.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">You must exercise caution when you compute income from each head separately. This is because even a minor error at this stage could affect the accuracy of your final taxable income.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Step_3_Add_the_Incomes_from_all_the_Applicable_Heads\"><\/span><b>Step 3: Add the Incomes from all the Applicable Heads\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">After you compute the taxable income from all applicable heads individually, you must add them together. The resulting figure is your gross total income or GTI. It represents all of the income you earned during the course of the financial year.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Step_4_Choose_an_Income_Tax_Regime\"><\/span><b>Step 4: Choose an Income Tax Regime\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">It is important to choose the tax regime under which you want to be taxed. This is because it determines the tax deductions you can claim.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Under the old regime, you can claim a wider range of tax deductions, including those available under Chapter VI-A of the Income Tax Act. However, the income tax rates under this regime are much higher.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">On the contrary, you get to enjoy lower income tax rates under the new regime. But the list of tax deductions available to you is very limited.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Step_5_Opt_for_the_Tax_Deductions_According_to_the_Chosen_Income_Tax_Regime\"><\/span><b>Step 5: Opt for the Tax Deductions According to the Chosen Income Tax Regime<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Identify and subtract all applicable tax deductions from your gross total income based on the income tax regime you\u2019ve chosen.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For example, let\u2019s assume you\u2019re a salaried individual. You\u2019ve decided to opt for the old tax regime. You can deduct HRA, LTA, and the standard deduction of \u20b950,000 from your salary income.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, if you had opted for the new tax regime instead, you can only subtract a standard deduction of \u20b975,000 from your salary income. This is because all other deductions, like HRA and LTA, are not permitted under the new regime.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Step_6_Compute_the_Taxable_Income\"><\/span><b>Step 6: Compute the Taxable Income\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Once you\u2019ve subtracted all the applicable tax deductions from your gross total income, the resulting figure is your net taxable income (NTI). This is the final amount on which your income tax liability is calculated.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The income tax slab rates applicable to you will vary depending on the tax regime you\u2019ve chosen.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Lower_Your_Taxable_Income_With_Smart_Investments\"><\/span><b>Lower Your Taxable Income With Smart Investments<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Once you have a clear picture of what taxable income is and how to calculate it, you must shift your focus to financial decisions that reduce your income tax liability. An investment in tax-saving fixed deposits through the GoldenPi platform helps you do just that.\u00a0<\/span><\/p>\n<p><a href=\"https:\/\/goldenpi.com\/\"><span style=\"font-weight: 400;\">GoldenPi<\/span><\/a><span style=\"font-weight: 400;\"> lets you invest in tax-saving FDs from RBI-regulated banking institutions. The amount you invest qualifies for a deduction under section 80C of the Income Tax Act, 1961. This means you can reduce your taxable income by up to \u20b91.5 lakh every financial year.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Alternatively, if you\u2019re looking for investment options that offer competitive interest rates, GoldenPi\u2019s extensive selection of <\/span><a href=\"https:\/\/goldenpi.com\/corporate-bonds\"><span style=\"font-weight: 400;\">corporate bonds<\/span><\/a><span style=\"font-weight: 400;\"> might interest you.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"FAQs_on_Taxable_Income\"><\/span><b>FAQs on Taxable Income<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"1_What_is_taxable_income\"><\/span><b>1. What is taxable income?\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Taxable income is the total income you\u2019ve earned during a financial year after accounting for eligible tax exemptions and deductions. The Income Tax Department (ITD) taxes you based on your taxable income.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"2_What_is_the_difference_between_gross_income_and_taxable_income\"><\/span><b>2. What is the difference between gross income and taxable income?\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Gross income is the total income you\u2019ve earned during a year before tax deductions. Meanwhile, taxable income is the income that remains after subtracting tax exemptions and deductions you\u2019re eligible for as per the Income Tax Act, 1961.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"3_What_heads_of_income_are_included_under_taxable_income\"><\/span><b>3. What heads of income are included under taxable income?\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Taxable income includes income from five major heads. These are salary, house property, profits and gains from business or profession, capital gains, and other sources.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"4_How_can_I_reduce_my_taxable_income\"><\/span><b>4.\u00a0 How can I reduce my taxable income?\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">You can reduce your taxable income by claiming deductions under Chapter VI-A of the Income Tax Act, 1961. However, deductions under Chapter VI-A are only available if you opt for the old tax regime. With the new tax regime, the number of tax deductions available is limited.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"5_Are_the_maturity_proceeds_from_a_life_insurance_policy_taxable\"><\/span><b>5. Are the maturity proceeds from a life insurance policy taxable?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">No. Any sum of money from a life insurance policy is fully exempt from tax as per section 10(10D) of the Income Tax Act, 1961.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Disclaimer:<\/b><\/p>\n<p><span style=\"font-weight: 400;\">This information is for general information purposes only. GoldenPi makes no guarantee on the accuracy of the data provided here; the information displayed is subject to change and is provided on an as-is basis. Nothing contained herein is intended to or shall be deemed to be investment advice, implied or otherwise. Investments in the securities market are subject to market risks. Read all the offer-related documents carefully before investing.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Reserve Bank of India regulates fixed Deposit schemes. GoldenPi Securities Private Limited is a registered debt broker and acts as a distributor, not as a manufacturer, of the product.<\/span><\/p>\n<p><script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"FAQPage\",\n  \"mainEntity\": [\n    {\n      \"@type\": \"Question\",\n      \"name\": \"What is taxable income?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"Taxable income is the total income earned during a financial year after accounting for eligible tax exemptions and deductions. 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