Question

1. Does the economist's concept of recognizing income differ from the concept used in measuring taxable income?

Answer 1

Yes, ecomomist concept of recognising income is different from concept of income in taxation.

-From economists concept ," income is defined as the flow of monwy or goods according to an individual or a group of individual, or a firm ,or a company". Income may be wages, interest, ,profit or rent which may originate from the sale of product and services.

- There are 3 concept of Income according to economists-

1. National Income-    it is the total money value of all the goods or services producedwithin a domestic territory of a country for agiven FY.

2.Percapital Income- it is calculated as total national income divided by total population of a country. It shows the standard of living of a country.

3.Personal Income - it is the sum of all the income received by household members.

   Personal Income=

(salaries received+wages received+interest received+rent received+divdend received+any transfer payments)

-under ecomics tax is calculated on personal income RECEIVED.

-(Personal income-personal tax)= disposable personal income.

-According the the concept of income tax, income means" sum of money which a business or an individual receives in exchange of sales of goods,or servicesor through capital income".

-Under income tax income is categoried into 5 heads-

1.Income from salary

2. income from business/profession

3.income from house property

4. Income from house property

5.Income from other sources.

- under income tax, tax is calculated on the taxable income.

-Taxable income= total income- deduction under tax laws- exempted income.

Conclusion- concept of income and its recognization is different from economist point of view and from income tax laws point of view