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Ch.2- Q.3.1 - How is taxable income is calculated?

A

Ashish133

Member
Ch.3- Q.3.1 - How is taxable income is calculated?

The solution (in the book) says:
Income earned
+ Income in kind
+ Gross investment income
- Tax-free income
- Tax-free expenditure
- Allowance.

My question is: Why TDS on investment income is not shown as a deduction from gross income? The book states: "For tax purposes, the grossed up equivalent (i.e. inv. income) is included as taxable income, and the TDS can be offset against the person's tax liability."

2nd: Should the above calculation include means-tested benefits? Why?

Please Help.
 
Last edited by a moderator:
Hello

1. Tax deducted at source isn't shown as a deduction in the taxable income calculation. However, after this gross taxable income has been used to determine an individual's tax liability, the tax deducted at source is deducted from the tax liability so that the individual just pays the balance outstanding.

2. The calculation doesn't include means-tested benefits as these are generally tax-free in the UK.

I hope the studying is going well :)
Lynn
 
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