What is Annual Income, Net Income and Gross Income, how is it calculated?

What is Annual Income, how is it calculated?

Hi friends, the Annual Income, Net Income, Income after tax, Gross Income are various jargon of terms which comes to our mind while we calculate our Income, but they are all not the same and have a significant difference between them, which I would like to share with you.

Annual Income: Annual income is the amount of income which someone has earned by various means in a fiscal year.

That can Include income earned from various sources like:

• Income earned from salary while working for any establishment. Salary may further more include any or all of the following:

• Basic Salary

• House Rent Allowance (HRA)

• Dearness Allowance

• Conveyance Allowance

• Special Allowances/bonuses

• Entertainment Allowance/bonuses

• Overtime Allowance/Bonuses

• Medical Reimbursement Allowance/Bonuses

• Income earned from commissions etc.

• Income from Business.

• Income earned from bonus, overtime, Night shifts, shift allowances etc.

• Income earned from various lotteries online or offline.

• Income earned from any ancestral property or Agricultural land etc.

• Dividend Income from stocks or Mutual funds, Income from profit received from trading stocks.

This also includes various means which may not be noted here but constitute something which gave oneself a monetary benefit which can come in category of Income and provides someone with monetary benefit.

Net Annual Income: Net income is the amount leftover to oneself after all deductions on Annual income in a year.

• Net annual income is the income calculated after taxes and deductions.

• The deductions may include exemptions given by government or taxes as per the laws of the land.

• For business the net income can be calculated by deducting operating cost and taxes from the Annual income.

Gross Income: Gross income is a term reserved for income from some business or services earned but that may not constitute it annually, eg. Annual income is calculated for a year ie. Annually, however Gross Income we can calculate for 5 years. Gross Income calculated for a year is same as Annual Income for that year. Gross Income is also referred as Revenue in business language.

Net Income: Net Income is the net income for a period of time which may be a year or more than a year. We can calculate net income even for more than year.

Net Income Annually = Net Annual Income.

Net Income = Gross Income/Revenue -- Total Expense - Taxes

Sample of income statement from a business entity to distinguish Gross income and net incomes.

	Income Statement
Revenue/Gross Income		2020	2019
	Sales revenue	2,20,000	95,000
	(Less sales returns and allowances)
	Service revenue	89,000	66,000
	Interest revenue
	Other revenue
Total Revenues/Gross Income		3,09,000	1,61,000
Expenses
	Advertising	2,000	2,000
	Bad loans
	Commissions
	Cost of goods sold	70,000	70,000
	Depreciation/Amortization
	Employee Benefit costs	30,000
	Furniture and equipment		8,000
	Insurance
	Interest expense	2,200	5,200
	Maintenance and repairs
	Office supplies
	Payroll taxes
	Rent
	Research and development
	Salaries and wages	6,600	55,000
	Travel
	Utilities
	Other	6,900
Total Expenses		1,17,700	1,40,200
	Net Income Before Taxes	1,91,300	20,800
	Income tax expense	14,936	9,920
Income from Operations		1,76,364	10,880
Below-the-Line Items
	Extraordinary items
Net Income		1,76,364	10,880