Published Oct 22, 2025 4 Min Read

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Gross income refers to the total earnings an individual receives before any deductions like taxes or exemptions are applied. It includes income from all sources such as salaries, bonuses, rental income, interest, and dividends. Understanding gross income is essential as it forms the basis for calculating taxable income, helping you plan your finances effectively.


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What is taxable income?

Taxable income is the portion of your gross income on which taxes are levied after accounting for deductions and exemptions. It is calculated by subtracting eligible deductions, such as Section 80C investments and exemptions, from your gross income, including allowances like House Rent Allowance (HRA). Knowing your taxable income ensures accurate tax liability calculations, helping you avoid penalties.


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Key differences between gross income and taxable income

AspectGross IncomeTaxable Income
DefinitionTotal earnings before deductionsIncome remaining after deductions/exemptions
ComponentsSalary, bonuses, dividends, etc.Gross income minus deductions/exemptions
PurposeRepresents total earning capacityDetermines tax liability
ExampleRs. 10,00,000 (annual salary with benefits)Rs. 7,50,000 (after deductions)

By understanding these differences, you can better manage your income and taxes while planning for future financial goals.

Conclusion

Gross income and taxable income are crucial concepts for effective financial planning. While gross income reflects your total earnings, taxable income determines your tax liability. By leveraging deductions and exemptions, you can optimise your taxable income and reduce your taxes.


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Frequently Asked Questions

Do I report gross income or taxable income?

You report taxable income, which is derived after subtracting deductions and exemptions from your gross income. This figure determines your tax liability.

Why is my gross income less than my taxable income?

Gross income is reduced by deductions and exemptions to calculate taxable income. If certain components of gross income are not deductible, your taxable income may appear higher.

Is my taxable income the same as my gross income?

No, taxable income is derived from gross income after accounting for deductions like Section 80C investments and exemptions like HRA.


 

By understanding gross and taxable income, you can make informed decisions for better financial management. To ensure your savings grow steadily, explore Bajaj Finance Fixed Deposits, offering assured returns and flexible tenures. Open an FD today!

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.

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