The broad categories of income in the income method of estimating national income are:
- Compensation of Employees: Income earned by labour for their services, including:
- Wages and salaries in cash, including bonus, commissions, dearness allowance, house rent allowance, travelling allowance (TA) to get to and from work, leave travel discount (LTC), sick leave allowance, and more.
- Take note that the TA that has to do with business is not included. Supplementary labour income in the form of employers’ contributions (not individual contributions) to social security plans for workers, such as pension plans, provident funds, group insurance, bonuses, and so on.
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Operating Surplus: Income from ownership and use of capital, including:
- Rent: Income from land and buildings, including imputed rent of self-occupied houses.
- Interest: Net interest earned from lending to businesses, banks, or government bonds, excluding interest on government debt and consumer borrowings.
- Royalty: Income from rights like mining, patents, and copyrights.
- Profits: Income earned by entrepreneurs from their business.
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Mixed Income of Self-Employed: Mixed income refers to the earnings of both self-employed individuals and unincorporated businesses. These kinds of incomes come from farming, trading, transportation, being a single proprietor, working as a lawyer or doctor, or working as a plumber, carpenter, or other self-employed person.
These components together form the basis of calculating Net Domestic Product at Factor Cost (NDPFC) through the income method.
