U/s 14 the term “Gross Total Income” [ GTI ] means aggregate of incomes computed under the following Five heads :

• Income under the head “Salaries”
• Income under the head “ House Property”
• Income under the head “Profit and Gains of Business or Profession”.
• Income under the head “Capital Gain”.
• Income under the head “ Other Sources”.

After aggregating income under various heads, losses are adjusted and the resultant figure is called “ Gross Total Income” [ GTI ]

From Gross Total Income , Deductions u/s 80 are allowed. The resultant figure is called “Total Income “ on which Rates of Taxes are applied

“ Assessment Year” means the period of 12 months commencing on the 1st day of April every year. In India, the Govt. maintains its accounts for a period of 12 months i.e. 1st April to 31st March every year. As such it is known as Financial Year. The Income Tax department has also selected same year for its Assessment procedure.

The Assessment Year is the Financial Year of the Govt. of India during which income a person relating to the relevant previous year is assessed to tax. Every person who is liable to pay tax under this Act, files Return of Income by prescribed dates. These Returns are processed by the Income Tax Department Officials and Officers. This processing is called Assessment. Under this Income Returned by the assessee is checked and verified.

Tax is calculated and compared with the amount paid and assessment order is issued. The year in which whole of this process is under taken is called Assessment Year.

At present the Assessment Year 2008-2009 ( 1-4-2008 to 31-3-2009) is going on.

Example- Assessment year 2008-09 which will commence on April 1, 2008, will end on March 31, 2009. Income of Previous Year of an assessee is taxed during the next following Assessment Year at the rates prescribed by the relevant Finance Act

As the word ‘Previous’ means ‘coming before’ , hence it can be simply said that the Previous Year is the Financial Year preceding the Assessment Year e.g. for Assessment Year 2008-2009 the Previous Year should be the Financial Year ending 31st March 2008.

• Previous Year in case of a continuing Business :

It is the Financial Year preceding the Assessment Year. As such for the assessment year 2008-2009, the Previous Year for continuing business is 2007-2008 i.e. 1-4-2007 to 31-3-2008.

• Previous Year in case of newly set up Business :

The Previous Year in case of newly started business shall be the period between commencement of business and 31st March next following . e.g. in case of a newly started business commencing its operations on Diwali 2007, the Previous Year in relation to Assessment Year 2008-2009. shall be the period between Diwali 2007 to 31 March 2008.

• Previous Year in case of newly created source of income :

In such case the Previous Year shall be the period between the day on which such source comes existence and 31st March next following.