Income Tax 2025

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CHAPTER VI

AGGREGATION OF INCOME

Total income ​

101 ​

In computing the total income of an assessee, there shall be included all income on which no income-tax is payable under Chapter XVIIA-4.

Explanation

Section Summary: ​

Section 101 of the new income tax law deals with the aggregation of income for computing the total income of an assessee (taxpayer). It specifies that all income, including income that is exempt from tax under Chapter XVIIA-4, must be included in the total income calculation. This ensures that even if certain incomes are not taxable, they are still considered for determining the taxpayer's overall financial position.

Key Changes: ​

  • Inclusion of Exempt Income: Unlike previous provisions, this section explicitly mandates that exempt income (income on which no tax is payable under Chapter XVIIA-4) must still be included in the computation of total income. This is a shift from earlier practices where exempt income might have been excluded entirely from the total income calculation.

Practical Implications: ​

  • Taxpayers: Taxpayers must now report all income, including exempt income, in their tax returns. This ensures transparency and a comprehensive view of their financial situation.
  • Businesses: Companies and businesses must ensure that their accounting systems capture all types of income, even if they are exempt from tax, to comply with this requirement.
  • Compliance: Tax authorities will have a clearer picture of a taxpayer's total income, which may impact eligibility for certain deductions, exemptions, or tax slabs.

Critical Concepts: ​

  • Total Income: The sum of all income earned by the taxpayer, including taxable and exempt income.
  • Exempt Income: Income that is not subject to tax under specific provisions (e.g., agricultural income, certain dividends, or interest from specific bonds).
  • Chapter XVIIA-4: Refers to the section of the Income Tax Act that lists incomes exempt from tax.

Compliance Steps: ​

  1. Identify All Income Sources: Taxpayers must identify and document all sources of income, including exempt income.
  2. Include Exempt Income in Total Income: Ensure that exempt income is included in the total income computation, even if it is not taxable.
  3. File Accurate Tax Returns: Report all income, including exempt income, in the appropriate sections of the tax return.

Example: ​

  • Scenario: Mr. Sharma earns ₹10 lakh from his salary (taxable) and ₹2 lakh from agricultural activities (exempt under Chapter XVIIA-4). Under Section 101, his total income for the year is ₹12 lakh, even though only ₹10 lakh is taxable. This ensures that his total financial position is reflected accurately, even though the ₹2 lakh is exempt from tax.

This section emphasizes the importance of transparency and comprehensive reporting, ensuring that all income is accounted for, regardless of its taxability.