Domestic Income and Personal Income

What is Domestic Income?

Domestic Income involves the value of final goods and services produced on a domestic territory of a country. It takes into account all producers doing business within the country’s domestic boundary. A nation’s domestic income (NDP_FC) is generated by both the public and private sectors. Hence, it is divided into two sections:

1. Income from domestic product accruing to the Private Sector: The part of domestic income that only accrues to the private sector is referred to as income from domestic product accruing to the Private Sector.

2. Domestic Product Income accruing to the Public Sector: This refers to the part of domestic income that is paid to the public or government sector. In addition, it has two components:

• Income from property and entrepreneurship that accrues to government administrative departments: This includes income earned by government departmental enterprises (such as railways, postal, and telegraphs, etc.) from property (rent and interest) and business (profit).
• Savings of non-departmental enterprises: This includes any undistributed profits made by non-departmental government-owned enterprises (such as MTNL, LIC, etc.).

Income from Domestic Product accruing to Private Sector = NDP_FC – Income from Property and Entrepreneurship accruing to Government Administrative Departments – Savings of Non-departmental Enterprises

What is Personal Income?

The total of all the incomes that are received by households from all sources is known as Personal Income. It also includes factor and transfer incomes.

Personal Income does not include Corporate Tax and Retained Earnings

The households and private businesses both earn private income. Personal income, on the other hand, exclusively refers to that part of private income that is received by households only.

• Corporate Tax is excluded from personal income since it is paid to the government by private businesses and is not received by households.
• Personal income does not include Retained Earnings, which are retained by private firms for future expansion and unforeseen situations. 

Personal Income = Private Income – Corporate Tax – Retained Earnings

Difference between Personal Income and Private Income

Basis	Personal Income	Private Income
Meaning	It refers to the actual income obtained by households from all sources.	It refers to the sum total of income received by the private sector from all sources.
Concept	It is a narrower concept because it is a component of private income.	It is a broader term because it includes personal income.
Formula	Personal Income = Private Income – Corporate Tax – Retained Earnings	Private Income = Personal Income + Corporate Tax + Retained Earnings

Difference between Personal Income and National Income

Basis	Personal Income	National Income
Meaning	It is the total of all incomes actually received by households from all sources.	It is the sum of all factor incomes earned by a normal resident of a country over a period of one year.
Nature of Income	It comprises both factor and transfer incomes.	It comprises factor incomes only.
Public Sector Income	It does not include income by the public sector.	It comprises income earned by the public sector.