Income Approach of NI Accounting

This approach is based on the estimation of income of various factors of production. Income method considers payments made to all productive resources of the country in the form of rent, wage, interest and profit. Thus,

GDI = Rent+Wage+Interest+Corporate Profits along with Indirect Taxes and Depreciation

GNI = GDI+NFIA

NNI = GNI-Depreciation

It doesn't includes the followings:

1. The income earn from the sale of car, house, property, etc. produced in past.
2. The income earned from the sale of stocks, bonds.
3. Transfer payments from government.

The income method consists the following:

Wages and Salaries

It includes the wages and salaries received by the employees during the year plus certain supplements like provident fund and other labor income.

Rent

Rent includes the rent of land, factories, and houses from where the production process is carried out to supply goods and services to the consumer.

Interest

It includes the net interest income received by the people of the country from the investment as a factors of production.

Corporate Profits

It consists of corporate profits with inventory valuation and capital consumption, adjustments. It is the profits before tax, which consists of dividend, profit, tax and undistributed profits.

Depreciation

The depreciation made by each firm for the repair and maintenance of capital goods is also included in national income.

Net Indirect Taxes

The income generated from indirect taxes is also included in national income accounting approach.