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Personal, Disposable & Real Income
Personal, Disposable & Real Income
Tags: Gig Economy Economy WTO WTO Public Stockholding MSP Economic Growth Masala Bond Environmental Performance Index Forecast of Economic Growth Functions of the Finance Commission
Personal Income - The sum of all income a nation's citizens receive from all sources during a given year before Direct Taxes are paid is known as personal income. Individual Pay is never equivalent to the Public Pay, in light of the fact that the previous incorporates the exchange installments though they are excluded from Public Pay. By subtracting unreported corporate profits, profit taxes, and employee contributions to social security programs, personal income is subtracted from national income. These three parts are rejected from Public Pay since they truly do contact people. However, individual income-generating transfer payments from businesses and governments, gifts and remittances from abroad, windfall gains, and interest on public debt are appended with national income.
So, Personal Income equals National Income – Undistributed Corporate Profits – Profit Taxes – Social Security Contribution + Transfer Payments + Interest on Public Debt.
Personal Income is different from private Income because the private income is more than the personal income as it does not include corporate profits that are undistributed.
So, Personal Income = Private Income – Undistributed Corporate Profits – Profit Taxes
Disposable Income - Personal disposable income, also known as disposable income, refers to the actual income that an individual or family can use for personal consumption. Because it is income that accrues prior to the payment of direct taxes, the entire personal income cannot be used for consumption. Subsequently, to get discretionary cash flow, direct Duties are deducted from individual Pay.
So Disposable Income equals Personal Income – Direct Taxes
However, not all of the income that is available for spending is used for consumption, and some of it is saved. As a result, disposable income is divided into savings and spending for consumption.
So, the Disposable Income equals the sum total of Consumption Expenditure and Savings
We subtract indirect taxes and subsidies, direct taxes on individuals and businesses, social security payments, undistributed corporate profits or business savings, transfer payments, and net income from overseas if disposable income has to be substracted from the National Income.
So, the Disposable Income equals National Income – Business Savings – Indirect Taxes + Subsidies – Direct Taxes on Persons – Direct Taxes on Business – Social Security Payments + Transfer Payments + Net Income from foreign.
Real Income - The term "real income" refers to the national income that is calculated using the average price levels of a given year as a starting point. The value of produced goods and services in dollars at current prices is the definition of national income. However, it does not accurately reflect the state of the economy. This year's net national product of goods and services may have been lower than last year's, but this year's NNP may have been higher due to higher prices. Going against the norm, it is likewise conceivable that NNP could have expanded however the value level could have fallen, subsequently Public Pay would give off an impression of being not exactly that of the last year. The National Income does not accurately reflect the country's actual situation in either case. To correct such an error, the idea of genuine Pay has been developed.
A specific year is used as the base year to determine a nation's real income when the general price level is neither too high nor too low, and the price level for that year is assumed to be 100. Now, the prices of the base year are used to evaluate the general level of prices in the year for which the real National Income is to be calculated. The following formula is utilized for this purpose.
Real NNP equals NNP for the Current Year x Base Year Index (=100) / Current Year Index
Let's say that the base year is 1990–91 and that the National Income for 1999–2000 is Rs. 20,000 crores, and this year's index number is 250. As a result, the Real National Income for 1999-2000 will be 20000 x 100/250 Rs. 8000 crores. At constant prices, this is also known as the National Income.