Before you handle finances, one has to know the basic difference between gross income and net income which will be helpful while filing your taxes.
These both matter for a salaried as well as a business person.
Gross Income :
Gross Income is the complete amount what a person earns, without any deductions. Say for example, Hari make Rs 50,000 per month, this is his gross income.
Net Income :
Net Income is the amount left after tax and other deductions. Net Income will always be less than the gross income.
Tax implications :
Everyone knows that for salaried persons tax is deducted by employer before paying the amount.
Consider a person Hari, who falls in the 20% tax bracket.
Say Hari earns Rs 50,000 per month,
Tax implied is 20% i,e 0.20
So, Rs 50,000- Rs 10000
Hari's Net income is Rs 40,000/-
If Hari is self employed and net income for his business will be after deducting expenses, overheads, taxes and interest payments from gross income.
As per Indian taxation law, a salaried persons pays tax on the gross income as per Income-Tax Act of 1961. Self-employed and businesses persons pay tax on their net income as per Income-Tax Act of 1961.