Adjusted Gross Income (AGI) is a person’s total income from all sources after subtracting specific allowable deductions, and it is used to calculate income tax liability.
Adjusted Gross Income (AGI) is an important concept in income tax calculation. It represents your gross income minus certain deductions, also known as “adjustments to income.” These adjustments may include deductions for retirement contributions, education-related expenses, or other eligible deductions as per tax laws.
AGI acts as the base figure for calculating taxable income. Many tax benefits, exemptions, rebates, and deductions are determined based on AGI levels. A lower AGI can help reduce overall tax liability and may increase eligibility for tax-saving benefits.
For salaried individuals, professionals, and business owners, understanding AGI is essential for effective tax planning. Proper use of deductions can legally lower AGI and help save taxes.
"If a person earns a total income of ₹8,00,000 in a year and claims ₹1,50,000 as eligible deductions, their Adjusted Gross Income (AGI) will be ₹6,50,000."