Income means what comes in the hand of a person in terms of money or money’s worth as a result of mental, physical and financial efforts during a period which has usual characteristics of income and is within the preview of relevant income tax law. In businesses, income can refer to a company’s remaining revenues after paying all expenses and taxes. It is the engine that drives an economy because only it can create demand.
There are some characteristics of income. They are as follows –
Revenue receipts: Income means any revenue receipt. Such receipt is essentially the product of capital.
Recurrent in nature in general: It should necessarily be the recurrent return from a definite source through it may not always be of that nature.
Money or money’s worth: Income must be in form of money or money’s worth.
External source: The source must be external.
Definite source: The source of income needs to be definite. So the windfall income is not an income.
Actual receipt: Here relief from expense is not income.
No bar to illegality: The taint of illegality or wrongdoing associated with income, profits, or gains is immaterial for the purpose of taxation.
Nature of source: Income received from a definite source is taxable but when it is received in exchange for a job or termination of an agency.