What Is Gross Income
What Is Gross Income?
Gross income refers to the income earned by an individual after deducting all the expense and other taxable deductions. In other words, the taxable income received by an individual is known as the gross income. The sources of income include salaries, wages, capital gain or capital loss, dividends, royalties etc. There are several websites which also host a gross income calculator to calculate your taxable income.
Gross income is calculated using certain steps: –
- The first step for the calculation of gross income is to list all the sources of income. The source of income could be anything which helps you earn money. After the incomes are listed, the incomes need to be added to form a grand total of the gross income.
- This grand total of the gross income has to be deducted with a standard deduction. Depending upon the filing of returns by the tax applicant and age. Age is a factor considered to determine the tax levied on the gross income. The taxable interest is higher for male adults when compared to women adults and elderly people. These factors are taken into consideration to deduct the taxes from the gross income to form net income.
There are various benefits that are provided by calculating the gross income. Using the gross income, numerous organizations in various fields take decisions. For example, a mortgage company looks into the tax payment of the individual to approve the mortgage application. The calculation of the gross income also helps the individual to get government assistance.
The different items of income are mentioned below: –
- Wages – This is the source of income or fees received for the services provided. This income is normally paid either on a daily basis or monthly basis.
- Interest – This is also a direct source of income which is gained by the investments of funds in banks and capital markets which fetches interests.
- Dividends – This is an income which is provided as a part of the profits of the company to its share holders.
- Rent – If you posses an immovable property like machinery building etc, it can be rented out to others for a specified rent.
- Royalty – This is an income which is derived for the use of your work by others. For example, the authors get paid royalty for the sale of books by the publisher/
- Pensions – This is the income which is provided by the government institutions after retirement.
These are the few types of income which are calculated to form the gross income. This amount is deducted with taxes that rightly need to be paid to government.