Income is basically the money that is earned. The Income is used to fund the day-to-day expenditures.
Investments, salaries, Pensions, and other Social Security are the primary sources of income for the retirees. For the individuals, the income is most often received in the form of wages or by salary. The Business income can refer to a company's remaining revenues that are paid after paying all the expenses and the taxes. In this case, the income is referred to as the "earnings.” Again, this income is subject to taxation.
Difference Between National Income and Private Income
The difference table is as follows:
What is National Income?
[Image will be uploaded soon]
National income is the value of goods and services that are produced by a country in a financial year. This is the outcome of the economic activities of any country which is during a period of one year and this is valued in terms of money. The National income, national dividend, national output, and national expenditure are all synonyms.
The National Income is the total amount of income that accrues to a country from its economic activities in a particular year’s time. This includes payments that are made to all the resources either in the form of wages, interest, rent, and profit.
The progress of a country is to be determined by the growth of the national income of the nation. There are two types of National Income Definition:
According to Marshall - “The labour and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. The true net annual income or revenue of the country or national dividend.”
While the Modern National Income is
Gross Domestic Product is the value of all goods which are being produced and the services that are served within a country during a year.
Gross National Product, in order to calculate GNP, we need to collect and assess the data from all the productive activities, like the agricultural produce, wood, minerals, commodities.
What is Private Income?
[Image will be uploaded soon]
Private income is the factor of total incomes and the transfer incomes that are received from all the sources by the private sector that are the private enterprise and the households that are within or outside the country.
Private Income also includes the net factor income from abroad. Private Sector consists of all the private enterprises and households, who are the factor owners.
Private income consists not only of the factor incomes which are earned within own territory and abroad but also consists of all the current transfers from the country’s government and rest of the world. This is the sum of earned incomes and the transfer incomes that are received by the private sector.
So, this concept of private income is quite broader than that of personal income as private income consists of personal income + profit tax + the undistributed profit. This is required to be kept in mind that the net factor income from abroad is also allocated to the private sector and not to the government sector.
In the Formula
Private Income = Income from domestic product accruing to private sector + Net factor income from abroad + All types of transfer incomes
= National Income – Income from domestic product accruing to Government Sector + Transfer incomes