Offers
Rates
V-KYC
Debit Card Related
Credit Card Related
SA Welcome Kit 
Manage Mandate(s)
Get Mini Statement
categories
Bloggers
Blog collection
Press Release
Taxable Income Vs Gross Income: What are the Differences?
Posted on Thursday, March 20th, 2025 | By IndusInd Bank
If you file your income tax or are going to for the first time, you come across two terms: ‘gross income’ and ‘taxable income’.
While gross total income represents the total earnings before any deductions, taxable income is the portion of your income that is subject to taxes. Let’s understand these concepts in detail.
What is Gross Income?
Gross income, also known as gross total income, is the total earnings an individual or business receives before any deductions or taxes.
It includes income from multiple sources, such as:
1. Salaries and Wages: This includes all compensation received from employment, such as basic salary, bonuses, and commissions.
2. Business and Professional Income: Earnings from business activities or professional services.
3. Capital Gains: Profits from the sale of assets like stocks, bonds, or real estate.
4. Rental Income: Includes the income you receive from renting out properties.
5. Dividends and Interest: Income from investments in stocks, and deposits in savings accounts and term deposits.
6. Other Sources: Includes income from sources that is not categorised above.
What is Taxable Income?
Taxable income, on the other hand, is the portion of your income that is subject to taxation. It is calculated by subtracting eligible deductions and exemptions from your income. These deductions and exemptions reduce your tax liability and vary based on factors like your age, eligible expenses, investments, etc.
Now that you know what taxable income is, let’s see how you can calculate it.
How to Calculate Taxable Income?
Calculating taxable income involves the following steps:
1. Determine Gross Income
Sum up all sources of income to calculate your gross total income.
2. Subtract Deductions
Apply deductions for retirement savings, home loan interest repayment, medical insurance premiums, and more. Section 80C of the Income Tax Act offers an extensive list of deductions to reduce your tax liability.
3. Apply Exemptions
Factor in any applicable exemptions. For instance, the house rent allowance earned by employees is eligible for exemption under Section 10(13A). However, it is subject to certain conditions.
4. Calculate Taxable Income
The amount remaining after subtracting deductions and exemptions is your taxable income.
Note: When calculating deductions and exemptions, consider the tax regime you are paying tax under. There are two tax regimes presently: the old tax regime and the new tax regime. While the old regime provides a large number of deductions, the new regime offers lower tax slab rates.
Differences Between Gross Income and Taxable Income
Here are the key differences between gross total income and taxable income:
| Parameter | Gross Income | Taxable Income |
| Definition | The total earnings before any deductions. | The income remaining after deductions and exemptions, which is subject to tax. |
| Purpose | Reflects total earning capacity. | Determines the amount of income that will be taxed. |
| Calculation | The sum of all sources of income. | Gross income minus allowable deductions and exemptions. |
| Impact on Taxes | Does not directly impact tax liability. | Directly affects the tax payable. |
Also Read: Importance of Tax Planning in Building Long-Term Wealth and Maximising Savings
Conclusion
To summarise, gross income provides a comprehensive view of your earnings, while taxable income is the portion that determines your tax liability. To reduce your tax outgo, you must make the right use of deductions and exemptions. Choosing the right tax regime can make a major difference.
Similarly, selecting the right banking partner, like IndusInd Bank, can also make a big difference. We offer a range of savings accounts with competitive interest rates and digital banking. Whether you are looking for a Zero Balance Savings Account, like the Indus Delite Savings Account, or a feature-rich high-interest account like the Indus Multiplier Max Savings Account, we have it all.
Open a Savings Account with IndusInd Bank today!
Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.
