What is Taxable Profit? | Definition, Types and Computation

Taxable Income is referred to a business corporation or an individual’s compensation in order to find out the tax liability. To determine how much an organization or an individual has to pay the government for a specific tax year, gross income or the total income is used as a basis for the calculation. One important point is that Taxable Income not only includes an individual’s salary but only considers other forms of compensation like bonuses, tips, commissions, allowances, and capital gains.


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Bank overdraft is a good source of finance for _________.

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This Income includes all categories of compensations that are in the form of services, cash, and even property. Every income is included in the report of Income Tax return and it is taxable unless the law exempts the income from tax liability. Examples are wages, salary, stock options, interest from the bank, dividend, rent earned from personal property, and unemployment compensation.

Types of Taxable Income

1. Business and Investment Income

Self-employed people also have to pay taxes from the income they earned from their business. It includes income from rent and partnership income.

2. Employee benefits and Compensation

These types of Taxable Income includes salaries, fringe benefits and wages. These Taxable Income are the most common.

3. Miscellaneous Taxable Income

Incomes that doesn’t come under other incomes are included in Miscellaneous Taxable Income. Some examples are life insurance, death benefit, and cancelled debts. Some other incomes in this category are alimony, income earned from hobbies, and barter trading.

Computation of Taxable Income

Tax season means now everyone has to calculate how much they have to pay by determining their total income for the period. Some people do this task from accountants and some calculate their tax amount by themselves.

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