Certain Incomes not taken While Calculating Income Method

Certain Incomes not taken While Calculating Income Method

Transfer Income

It refers to any income received without providing any goods and services in return

Example - Old age pension, donation, charity

Income from Sale of Second hand goods

it is not included as amount is already covered on amount received on sale of original goods

Exception - We will take commission income of brokers on sale of second hand goods

Income from Sale of shares and debentures

Exception - We will take commission income of brokers on sale of shares and debentures

Windfall gains (Lotteries ,horse race etc)

They also do not contribute to any production activity

Payments from Past Savings (Gift tax ,interest tax, death duties)

They are part of past wealth and do not contribute to any production activity

Question 16

Calculate National Income.

Answer

Step 1

We calculate Compensation to Employees

= wages and salaries + Employer's contribution to social schemes

= 500 + 50 = 550

Step 2

We calculate National Income

What is Net Current Transfers from Rest of World

It is the difference between

Transfer Income from Rest of World to India and

Transfer Income from India to Rest of World

Example - Foreign Aids, grants, remittance from workers from outside country to their family members

Note

These are not included while calculating National income

as per Income Method

as these are Factor Income

and not transfer Income

Question 17

Calculate NNP at FC.

Answer

In this question, we are not given Profit directly

We are given Dividend, Undistributed Profit and Corporation Tax

We calculate Profit by totaling all 3

Step 1

Lets Calculate Profit

= Dividend + Undistributed Profit + Corporation Tax

= 60+20+40 = 120

Step 2