What is annual income?
An individual's annual income is the total amount of money earned from all sources within a fiscal year. This includes salary, tips, commissions, bonuses, overtime compensation, and more. In many financial situations, annual income is used to assess a person's financial health, such as when applying for mortgages, loans, credit cards, etc.
Breaking down gross and net annual income differences
Gross income and net income are the two classifications of annual income. Gross income is the total earnings, while net income is the amount left after deducting taxes and expenses. So, your net income is smaller than your gross income.
What constitutes the annual income of an individual?
As we have seen, an individual's annual income is the total amount of money they earn through a specific financial year, prior to tax deductions. In India, the financial year spans from April 1st to March 31st of the following year. An individual's annual income comprises the money they have earned within this timeframe. Several factors contribute to an individual's annual income, including:
- Salary
- Bonuses
- Commissions
- Overtime pay
- Investments
- Freelance work
- Other sources of income
These factors combined determine an individual's total annual income, which is subject to tax deductions.
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