Personal income
Also called: PI · Topic: National Income Accounting: GDP, GVA and Welfare · NCERT: Class 12, Ch 2 "National Income Accounting"; Class 12, Ch 5 "Government Budget and the Economy"
Meaning
Personal income (PI) is the part of national income that actually reaches households, plus the transfers they receive. To get it, some items are subtracted from national income (NI): profits that firms keep, corporate tax, and net interest paid by households. Transfer payments such as pensions and scholarships are then added.
PI = NI − undistributed profits − corporate tax − net interest payments by households + transfer payments
Example
National income is ₹8,200 crore. Undistributed profits are ₹1,000 crore and corporate tax is ₹500 crore. Net interest paid by households is −₹300 crore, and transfers are ₹300 crore. So PI = 8,200 − 1,000 − 500 + 300 + 300 = ₹7,300 crore.
Don't confuse with
- Personal disposable income (PDI): PDI = PI − personal taxes (such as income tax) − non-tax payments (such as fines). In the example above, personal tax of ₹500 crore gives PDI of ₹6,800 crore.
Related concepts
- Gross National Product
- Net factor income from abroad
- Normal residents
- Domestic territory
- Net Domestic Product
- NDP at factor cost
- Net National Product
- GNP at factor cost
- National income
- Undistributed profits