What is personal income: sources of formation and its indicators. Deduction from the total income of individuals What is personal income in economics
Total income is the sum of all income for the reporting period, it includes cash and profits received in kind.
Total income of a legal entity
The company's total annual income is taken into account for tax purposes. It includes:- profit from the sale of goods and services;
- funds from the sale of assets: land, buildings, equipment;
- debt recovery;
- compensation for tax deductions;
- dividends and interest on deposits;
- property received free of charge.
Total income of an individual or family
The total income of individuals is formed from the following payments:- salary and bonuses;
- pension and allowances;
- monthly child benefits;
- alimony;
- business income;
- money and property received free of charge;
- income from gardening, cattle breeding;
- dividends;
- interest on deposits;
- winnings.
- housing assistance;
- funeral benefit;
- compensation for damage from emergency situations;
- financial and material assistance to the poor;
- lump sum benefit for the birth of a child;
- payments for treatment and prosthetics;
- help from charitable foundations.
The difference between the average per capita and total income of an individual
Calculation of total income is necessary for assessing wealth. Therefore, the total profit of an individual individual is practically not considered. It creates a misconception about your actual financial situation. Example:Alexander’s salary is 40 thousand rubles. He has a modest business that brings in another 20 thousand monthly. The total income is 60 thousand rubles.
The wife receives an allowance for the youngest child in the amount of 6 thousand rubles. Alexander’s father’s pension is 13 thousand, his mother’s is 8 thousand.
The total family income is 87 thousand rubles. If you divide this number by the number of people, you get 14.5 thousand.
Alexander earns good money, but this does not indicate his well-being. In this regard, average per capita income is more informative. It shows that the family has a modest income.
Total income functions
Legal entities calculate total income for tax purposes. This indicator is also used in reports to shareholders and to attract new investors. For the same purpose, the employer calculates the total income of individuals and its employees.Individuals need this indicator in three cases:
- To apply for assistance from the state in the form of benefits and benefits. You can only rely on them if the amount does not reach the established minimum.
- To obtain a mortgage and other loans. The monthly payment should not exceed 35% of the borrowers' income.
- To obtain a Schengen visa. The authorities of the host country must be sure that the tourist has sufficient income in his home country.
Bottom line
Total income is the sum of all income of an individual or legal entity. It does not include payments that are not taxable. The indicator is necessary for reporting by legal entities, receiving benefits from the state, applications for a loan or visa.32. The total income of a family or a single citizen living alone for the provision of a subsidy is determined for the last 6 calendar months preceding the month of filing the application for a subsidy (hereinafter referred to as the billing period).
33. When calculating the total income of the family of the subsidy recipient, regardless of separate or joint residence, the income of citizens who are in relation to the subsidy recipient or members of his family is taken into account:
A) spouse;
b) parents or adoptive parents of minor children;
c) minor children, including adopted children.
34. The total income of a family or a citizen living alone for the purpose of providing a subsidy is calculated according to the rules established in paragraph two of Article 5 and - of the Federal Law "On the procedure for recording income and calculating the average per capita income of a family and the income of a citizen living alone for recognizing them as poor and providing them with state social assistance" (Collection of Legislation of the Russian Federation, 2003, No. 14, Art. 1257), taking into account:
a) types of income specified in paragraph 1 of the list of types of income taken into account when calculating the average per capita family income and the income of a citizen living alone for the provision of state social assistance to them, approved by Decree of the Government of the Russian Federation of August 20, 2003 N 512 (Collection of Legislation of the Russian Federation, 2003, No. 34, Article 3374), with the exception of cash equivalents of benefits and social guarantees received by family members, established by government bodies of the Russian Federation, government bodies of constituent entities of the Russian Federation, local governments, including benefits for paying for housing and utilities services provided to citizens in the form of payment discounts. This exemption also applies to citizens living alone;
b) cash payments provided to citizens as social support measures for paying for housing and utilities;
c) income received from subletting residential premises;
d) compensation for housing and utilities paid to certain categories of citizens;
e) funds allocated to the guardian (trustee) for the maintenance of the ward, as well as provided to the foster family for the maintenance of each child;
E) funds allocated to pay for training in organizations engaged in educational activities, in cases where such payment is made not from the students’ own income or members of his family living with him, but from the funds of other persons provided on a free and irrevocable basis ;
(see text in the previous edition)
G) income received from the procurement of tree sap, collection and sale (delivery) of wild fruits, nuts, mushrooms, berries, medicinal and food plants or their parts, other forest food resources, as well as technical raw materials, moss, forest litter and other types secondary forest management;
h) income of amateur hunters received from the delivery of furs, fur or leather raw materials or meat of wild animals obtained by them;
i) monthly child care allowance.
35. When calculating the total income of a family or a citizen living alone, the following are not taken into account:
a) the types of income specified in paragraph twelve of subparagraph "d" of paragraph 1 (except for allowances and surcharges for all types of payments specified in this subparagraph), paragraphs 2 and the list of types of income taken into account when calculating the average per capita family income and the income of a single citizen living for providing them with state social assistance, approved by Decree of the Government of the Russian Federation of August 20, 2003 N 512;
(see text in the previous edition)
b) before the entry into force of the relevant federal law, the amount of monthly cash payment established in accordance with the Law of the Russian Federation “On social protection of citizens exposed to radiation as a result of the disaster at the Chernobyl nuclear power plant” (as amended by the Law of the Russian Federation of June 18, 1992 N 3061 -1), Federal Laws “On Veterans” (as amended by the Federal Law of January 2, 2000 N 40-FZ), “On Social Protection of Disabled Persons in the Russian Federation” and “On Social Guarantees for Citizens Exposed to Radiation as a Result of Nuclear Tests at Semipalatinsk test site";
c) cash equivalents of social support measures provided to citizens to pay for housing and utilities in the form of payment discounts;
d) the amount of previously provided subsidies to pay for housing and utilities;
e) other types of material support in the form of cash payments and (or) in-kind assistance provided to citizens at the expense of budget funds at various levels of the budget system of the Russian Federation in accordance with the legislation of the Russian Federation, except for those specified in
GDP is an important economic indicator that most fully characterizes the volume of the final product produced by the state in a given period.
But for all its importance, it does not allow us to answer the question about the amount of total income received by the population of a given country (employees, entrepreneurs, owners of securities, owners of real estate, etc.). In order to find the answer to it, it is necessary to calculate the quantity national income countries. As we have seen, not all components of GDP represent factor incomes that the population receives and disposes of. Depreciation charges are included in the cost of production and, being reimbursed from revenue, go into further circulation, but the enterprise cannot freely dispose of this part of the revenue. This element of cost, like all its other elements, has a strictly intended purpose - to compensate for the depreciation of fixed capital (buildings, structures, machinery and equipment). Therefore, depreciation charges cannot become income for the owners of production factors. If we subtract their sum from GDP, we get net national product. National income differs from net product only by the amount of indirect taxes.
NATIONAL INCOME = GDP – Depreciation charges – Indirect taxes
National income is thus the total income of all owners of factors of production.
The national income includes personal income. This concept reflects the totality of all gross income received by households in the current period. As was indicated at the beginning of our course, the state in a modern market economy plays a very important role, carrying out the function of redistributing income. Thus, it actively influences the formation of personal income.
TOTAL PERSONAL INCOME - the total amount of all gross income received by households in a country in an accounting period.
It should be noted that we are talking here not only about those households that, as owners of production factors, through their labor participated in the creation of national income, but also about those that did not participate in this process. Thus, households receive transfer payments from the state budget. These include payments from the social insurance system (pensions, benefits, scholarships, etc.), interest on government debt if households bought government bonds. Transfer payments from the government budget therefore lead to the generation of income, which, although not a factor, nevertheless contributes to an increase in the total amount of money that households receive.
The distribution of profits of joint-stock companies also influences the formation of income received by households. As we know, part of the profit is paid in the form of dividends to the owners of shares, represented by households. In addition, as a rule, firms pay pensions to employees from established pension funds (entrepreneurial transfers).
TOTAL PERSONAL HOUSEHOLD INCOME = National Income – Employee Social Security Contributions – Corporate Profits – Indirect Taxes + Government Social Transfers + Dividends + Entrepreneurial Transfers.
However, personal income is not completely at the disposal of households, since they pay personal (individual) taxes, which are a source of state budget revenue (income, land, transport taxes, property taxes, etc.).
TOTAL DISPOSABLE PERSONAL INCOME = Total Personal Income – Individual Taxes.
The issue of generating disposable income is of great practical importance for each of us. For example, an increase in personal taxes is a direct deduction from the personal income of the population, which reduces disposable income. But if this is accompanied by an increase in transfer payments to the population, then disposable income may not only not decrease, but even increase.
Behind this may be a well-thought-out policy aimed at limiting the growth of extremely high incomes and supporting low-income segments of the population (pensioners, large families, disabled people, etc.).
At the same time, if the increase in taxes, which restrains the increase in disposable personal income, is due to irrational, unjustified spending of funds (for example, swelling of the bureaucratic apparatus), then the increase in taxes on the population in this case will not have a positive effect and its consequences will become negative.
How do households manage their disposable personal income? They use one part of it for personal consumption ( WITH), the other - for savings ( S; English saving), which are defined as income minus consumption.
In the table we present the procedure for calculating the macroeconomic indicators we considered.
Source: Economics. Fundamentals of economic theory: textbook for grades 10–11. for educational organizations. Advanced level: in 2 books. Book 2 // Edited by: Ivanov S. I., Linkov A. Ya. Publisher: Vita-Press, 2018 Why is the System of National Accounts needed? If you want to get information about the level of production and welfare in a particular country, the sectoral structure of its economy, and the price level, then be sure to refer to statistical data. What is Gross Domestic Product (GDP)? Gross domestic product is the market value of all final goods (material goods and services) produced in the territory of a given country over a certain period. What is Gross National Product (GNP)? The economy of any country is part of the world economy, and many firms invest their capital in foreign enterprises. The difference between real GDP and nominal GDP We have already indicated that the volume of GDP, as well as all related macroeconomic indicators, is calculated in current prices at which created goods and services are sold. In this case, the value of nominal GDP is determined. GDP and quality of life Is it possible to measure the quality of life of people in a particular country using per capita GDP? Can we say that with an increase in the size of a country's GDP and national income, the population of any country always becomes more satisfied with the quality of their life? Gesell's monetary system How to limit the speculative activities of banks What is the ruble backed by? Reason for high GDP growth rates after 1998: depreciation of the ruble
(No ratings yet)Cumulative income is income that includes all of a person’s funds received over a certain period of time, regardless of the source of receipt. To calculate total income, you can take into account a quarter, a month, a half-year, or a year (for example, when filling out income statements, annual calculation is required). As a rule, it is recommended to add up the income received by a person during a period called a tax year.
Total income of a person
It is interesting that the concept includes salary, pension, and profit from any private entrepreneurial work aimed at generating income, and funds resulting from inheritance, donation, payments, and the sale of various types of movable and immovable property. Even loans provided by banks and other similar lending institutions are grouped under the phrase “total income”. When calculating total income, it is customary to sum up income in both monetary and intangible equivalents, which, according to accepted norms and rules, are measured in official state prices, and in the absence of such, in established market prices.
Family total income
On the scale of an individual family, total income is usually considered to be the sum of the income of each family member. When calculating it, according to the law, there is no need to mention social assistance and subsidies received from government agencies, budget funds expressed in the form of financial aid, alimony paid to children. Such calculations are often used to classify families as low-income and to qualify them for all kinds of benefits and subsidies associated with numerous social support programs.
Total income of a legal entity
For enterprises, total income is usually understood as the total amount of revenue earned by legal entities over the past period. In the general case, it is equal to the product of the formed price indicators and the volumes of goods or services already sold.
The main item of the total income of any state is the profit received from transfers of taxpayers registered on its territory; among other things, the country’s income usually includes all kinds of transfers and transfers made by other states and various international organizations and special funds, income from any internal activities, works and services aimed at receiving funds from abroad. The total income of a country is the total amount of funds received by all its citizens, or, as they are also called, residents.
In some cases, an objective assessment of the financial condition and solvency of not an individual person, but his entire family in which he lives, is necessary. This may be required, for example, to obtain a loan or various types of subsidies, including to pay for housing and communal services. In these cases, the monthly total family income is used as such a criterion.
What does total income consist of?
If we are talking about the total monthly income of a family, it is the sum of the monthly total income of all its members who have reached the age of majority. The average value of this income per family member is an objective criterion that allows us to judge the well-being of this family. The family in some matters related to monetary obligations, for example, with obtaining and repaying a loan, is considered as a single whole.To obtain a mortgage loan from a bank, it is required that the monthly payment does not exceed 35% of the total family income.
When determining total income, each member must take into account all cash receipts received by him. The total amount should include:
- wages, taking into account the bonuses received per month, additional payments, cash bonuses and rewards, and even financial assistance, the amount of which is usually not even paid to personal income tax;
- all benefits received for the month - day off, for a child, for temporary disability, for pregnancy and childbirth, for the period of parental leave and unemployment;
- received alimony, scholarships, pensions, military allowances, monthly insurance payments;
- income from any type of commercial activity;
- amounts paid monthly to citizens as part of social support for payment of housing and communal services and apartments;
- amounts received in the form of interest on deposits in banks;
- income from the rental of property, as well as from the sale of real estate and other property: securities, cars, etc.;
- payments from regional and local budgets;
- income from copyright and contract agreements;
- amounts of money that were received as a gift or by inheritance.
The monthly gross annual income is calculated taking into account the coefficients and allowances that are paid by law for work in areas with difficult climatic conditions.
What amounts will not be included in total income?
In your total income, you may not take into account the funds that you received from the sale of housing that you own, if these funds were spent on the reconstruction of the housing where you live, the construction or purchase of a new one. In the case where you received subsidies or benefits from the budget of a constituent entity of the Russian Federation as part of the Dilapidated Housing program, you also may not include them in your total income.Video on the topic
Profit and income are key indicators of the efficiency of a company's financial and economic activities; its profitability and solvency depend on them. There are a number of important differences between these concepts.
The concept of net income and its difference from profit
In Russian, the concepts of net income and profit are identical, while in Russian there are a number of differences between them. The concept of net income is broader than net profit.
Net sales revenue is calculated as gross sales revenue minus the cost of returned merchandise and discounts.
For an individual, net income is income after taxes, deductions and credits have been subtracted.
Profit is the target of a company's work, which stimulates its further activities; it is the part of annual income or revenue that remains after reimbursement of the costs of production and sales of products. There are gross, net and marginal profits.
Gross profit is generated from three sources, including:
Profit from sales of products, which is calculated as the difference between revenue from sales of products (excluding VAT and excise taxes) and its cost;
Profit from the sale of material assets is the difference between the sale price and the costs of their acquisition;
Non-operating income (income from securities, equity participation, rental of property).
Net income is a company's profit before dividends are paid. It is calculated as the difference between the company's total income and expenses (for example, the cost of goods) that it incurred in the course of its activities, then depreciation, taxes, penalties, and loan payments are subtracted from this indicator. Net income can be found on the income statement. It is a key indicator of a company's performance and is also used to determine earnings per share.
Contribution margin is defined as the positive difference between net sales income and the cost of products or services sold.
It is also worth distinguishing between accounting and economic profit. If the accounting account takes into account only expenses allowed by law, then the economic account also takes into account other informal expenses of the entrepreneur (for example, corruption, additional bonuses to employees).
Thus, net profit is always less than net income.
Annual income concept
Annual income is a broader concept than net income. At its core, it is close to the concept of annual revenue. It represents the amount of money a company receives from selling goods and services to its customers in a year. Revenue is always greater than net profit, because... includes all costs incurred by the company during the production and sales process.
Sources of annual income may be revenue from sales of goods or provision of services, from investment or financial activities. The decisive significance belongs to the income received from the main activity, because It is he who determines the meaning of the enterprise’s existence.
The amount of annual income depends on the effectiveness of the company’s assortment, sales, pricing and marketing policies.
Income, after taxes, can be used for consumption and investment purposes. The consumption fund is used for wages and other payments. The investment fund serves as a source of development of the company and diversification of its activities.
Personal income– a person’s monetary income, which consists of wages and other additional funds.
In other words, personal income- these are all funds that a person receives in cash or non-cash as remuneration for work, dividends, rents, gifts, etc. and uses at his own discretion. Calculated before deduction of taxes on personal income, transport and land taxes.
Personal income are an indicator of the true income that an individual can spend on his needs and paying taxes.
We will talk about what personal income is, what they are and what functions they perform in our article.
What does personal income consist of?
Personal income of the population has several sources of income:
- Earned. This type of income is considered the most common. Personal income is formed thanks to earned money. This is a well-known salary that is awarded to employees for work performed or services rendered.
- Unearned. Already from the very concept it becomes clear that for this type of income generation there is no need to make efforts, that is, to work. Such income represents various social payments: pension, allowance, scholarship. It can also be interest on deposits, receiving rent, dividends, etc.
Basic functions of personal income
Personal income in the enterprise system has several functions. The main ones:
- Reproductive. An employer, providing its employees with high wages, gives them the opportunity to devote themselves to their work, complete assigned tasks, and not be distracted by the search for additional income. Thus, professionalism grows and vacant positions are filled.
- Status. The employee occupies a position that corresponds to his income.
- Stimulating. The employer encourages workers to be more productive by increasing wages. As a rule, the amount of remuneration depends on the results of work.
- Regulatory. The supply and demand for labor is regulated by this function.
- Production and business. Depending on the price of the product, wages are determined. If an enterprise has a sufficient wage fund, then employees can count on decent wages.
Forms of personal income of the population
The population has two forms of receiving personal income:
- Monetary form- this is income that implies cash receipts in the form of wages, all social benefits, as well as interest on deposits, sale of securities, rent on real estate, sale of agricultural products, handicrafts, etc.
- In-kind form of income. Here we consider the supply to the population of various products that are produced by the household: products from the garden, cattle breeding, poultry farming, products obtained from gardens and personal plots, preparations from the gifts of nature. All these proceeds are intended for personal consumption, that is, they are not intended to receive funds.
Types of personal income of a citizen, depending on the level of consumer prices
Taking into account the level of consumer prices, the personal income of the average citizen is directly linked. The dynamics of these indicators divides income into several types:
- Personal nominal income is the amount of money received by the population in a specific period.
- Personal disposable income. Cash is intended for personal use.
- Real income. Based on available funds, a citizen can afford to purchase services or material assets.
Possible sources of replenishment of a citizen’s personal income
To supplement his personal income, a citizen can use various sources of income:
- By running his own business, a citizen can receive income from the profits of the enterprise.
- Salary is the most common source of income. It can be obtained from paid work or in the case of self-employment.
- If there is additional real estate, it can be rented out, for which you can receive a monthly income.
- Receipt of funds from the sale of property: house, apartment, car, etc.
- By providing services, such as medical services, you can receive revenue from the state or enterprises.
Difference between personal and national income
National income can be considered the basis for personal income. This type characterizes the economic stability of the country and shows the total amount of profit from all economic entities. This applies to manufactured products that are sold in the country itself and abroad.
It is also the provision of various services. Based on this, it can be understood that personal income is part of the value of the national product, obtained as a result of the economic activity of the entire state.
Having these indicators, you can see how rich the state is or vice versa.
In countries with developed economies and the absence of corruption, citizens are more prosperous and have personal income that allows them to live at a high standard. The population of countries in which national incomes depend on political and oligarchic actions are largely disadvantaged.
Do social benefits relate to a citizen’s personal income?
Social payments represent receipts to citizens from the state or regional authorities. These payments mean: pensions, student scholarships,.
Such transfers of funds are carried out unilaterally, that is, these funds are not subject to taxes and the state does not receive anything from it. This type of revenue, which looks like a non-market type of services or goods, is transferred to citizens free of charge. Based on this, we can safely say that these revenues are a source of well-being for the population and therefore can be called personal income.
How to calculate personal income yourself: formula
In order to calculate personal income, one must subtract from national income all income that is not at the disposal of households and add those income that increase personal income and are not included in national income.
Formula 1
Personal income = National income – Social security contributions. payments – Corporate income tax – Retained corporate earnings + Transfers + Interest on government bonds
Formula 2
Personal income = National income – Social security contributions. insurance – Corporate profits + Dividends + Transfers + Interest on government bonds
The presented formulas for calculating personal income can only be used in economic theory, since personal income is often a certain amount of money before taxes.
What can a citizen’s personal income influence?
The personal income of citizens affects many indicators, since it is these incomes that affect the standard and prosperity of life. Based on income indicators, one can judge the purchasing power of the population, level of education, recreation and health.
- Depending on salary the economy of the enterprise will depend, and the national economy will depend on this. For example, employees are always stimulated to perform better by high monetary rewards. Therefore, in order to improve the quality of manufactured products at the enterprise, which can serve to increase the country’s economy, employers try to adequately pay employees. No time is wasted on recruiting new personnel and training them, but on the contrary, work goes on continuously.
- Personal income at all times influenced relationships between people. Because there have always been rich and poor, that is, people with high personal income and insufficient. Based on this, we can say that “a well-fed person is not a friend to the hungry.”
- Depending on your personal income, citizens shape their level and quality of life. This applies to recreation, level of medicine and education, ability to dress and eat, etc.
How to protect your income: ways to save
Having received their personal income, citizens spend it for their own purposes - products, services, etc. But there is still a desire to save the rest of the money.
How can this be done?
- Set aside 10% of each income.
- Make an investment in a bank and receive interest on the deposit.
- Invest in precious metals.
- Buy real estate that can be rented out and receive additional personal income .
So, many people don’t even think about their personal income. Where does it come from, how to manage it, etc. Also, one should take into account the fact that personal income is not just money that citizens dispose of at their own discretion. First of all, this is an indicator indicating the level of economic situation in the country. Because national income directly reflects personal income.
Conclusion
Having received personal income, you can rationally use it for its intended purpose and, at the same time, save part of the money in the form of set aside money, deposits in a bank or real estate, which can ultimately bring additional personal income.