Part B TI of the Income Tax Return (ITR 4) form gives the details of computation of total income. It captures information relating to income from the five different heads, namely salary, income from house property, profits and gains from business or profession, capital gains and income from other sources. Let us call this A. The aggregate of such incomes as reduced by current and brought forward losses gives the gross total income, say B. From the latter, the deductions as available under chapter VI A are reduced and we arrive at the total income for the purpose of income tax, say C. It is evident that this form of capturing total income involves three constructs of income—the sum of the different heads, gross total income and total income. These constructs of income used by the income tax department in its statistics are obviously different from the “income” as would be understood by an economist.
From an economist’s point of view, an exempt income is an integral part of the income of the tax payer. However, the exempt incomes will not enter into the computation of any of the above constructs of income. Second, each of the heads of income has its own set of deductions. For example, the computation of the income from house property provides for deduction for maintenance or property. In the case of a self-occupied property, while the rental income will be nil, deduction of interest paid on loan-financed property will be available, which will then go