Questions Science and Education

What is the difference between national income and personal income?

2 Answers Airtract Airtract Date Sorting


Swati Jobin

Wake up with a purpose

Income increases people's living standards and so, if people earn more, then their standard of living goes upwards and vice versa. But this doesn't affect people only on a micro or personal level, but income which is the result of the addition of production pieces also contributes to the aggregate value of a country's living standards. This is counted as national income. But national income doesn't just mean income which is generated by simply individuals; there's more to it:

What is National Income?

National income gets calculated by GDP (Gross Domestic Product) so the higher this GDP is, the better a country's economy will be. In a nutshell, national income is counted as the total value added to an economy by the total input of all production factors. National income also gets generated by surplus or tax, which is earned by the government. Some of that is retained as part of reserves while some of it is also invested back into various business entities. Moreover, a part of it also falls into the foreign factor while the rest of it flows on to families in the form of salaries or wages. 

So, if this is national income, then what is the individual income which was being talked about earlier?

What is Personal Income?

Whatever an individual manages to earn in a specific period is known as the personal income of that person. It gets calculated on an annual basis since that is the period taken for considering the total income of an individual. But not every cent of that money is of the person as some of it has to be paid out in the form of taxes and other types of government impositions. 

What is the difference between National Income and Personal Income? 

  • Factors of Production: National income includes the earnings which are generated by various factors involving production but personal income, on the other hand, involves earnings which are received by those factors of production. As such, personal income is more of a receipt concept. 
  • Additions: Factors like windfall gains resulting from a lottery and such gets included in personal income but not in the national income. 
  • Government sector: Income coming from the government sector is included in national income but not in personal income. 
  • Undistributed Profits: The Undistributed profits of companies along with corporate profit taxes are also the part of national income, but these are excluded from national income when personal income is calculated. 

These all make for the differences between personal income and national income. 


Arjun Prabhat Varma

Challenge your limits

Revenue is something that essentially decides the living conditions and lifestyle of people.

Therefore higher the revenue goes, the luxurious lifestyle comes along with it and with the loss of income, it goes downwards only. Now income or revenue in general term looks life something

that deals with individualized interest but in reality that is not the case. A person's earnings not

only affect his individual lifestyle but also deals with their nation's aggregate value and overall GDP. The total earning of a nation is called national income. Though it will be a mistake to think

it is only the total of all citizen’s revenues. There is literally much more depth in the story.

National Income :

National income is calculated based on the gross domestic product of a certain country. Which is also called GDP. The higher the GDP is, the more developed that country will be. Various kind of revenues earned by the govt. contributes to this matter.

Personal Income:

Personal income indicates any income which is earned by an individual over a specific time period. The income total is perceived yearly or annually. In this time period, the total earning of

that individual is considered the individual's total personal income. But of course, for a specific reason, the total money doesn't belong to that person as taxes must be paid also.

The differences between national and personal income :

1 . The first one is dependant over numerous external factors like the kind of revenues but the second one is personal income involved earning which is relieved by the only production.

2 . The public sectors' earnings are not included in national income but are included in the personal income.

3 . Total earnings of corporates are counted in the national income, not in individual or personal income.

4 . The lottery can not be included in the national income.

Airtract Jamie Aitken -

Thanks for this info

Vote0 Date:09-07-2022

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