Active Income - Definition, What is Active Income, Advantages of Active Income, and Latest News - ClearTax (2024)

What is Meant by Active Income?

Active income refers to income from the rendering of some service for fixed income, such as wages, including bonuses, tips, and commissions. Active income also applies to the profit of the companies in which there is significant participation in running such business. For example, an accountant who works for a monthly paycheck gets active income.

Understanding Active Income in India

In India, the word "active income" means the income received by performing a regular operation. Almost all of us accomplish this regular act. Such regular tasks include work, businesses and shopkeepers, and professions such as attorneys, physicians, etc.

Active income is a sort of income for which most people work unless they have been born into wealth or won a lottery. That is the money you receive from your work as tips and wages. If you have any doubts about whether a given income is an active income, ask yourself the following question. Will I be paid if I don't do the job? If the answer is no, then the income is free.

Difference Between Active and Passive Income

Passive income is the sort of income that people misinterpret. They consider that only certain people whose luck favours them with ancestors' money can earn it.

Singers, authors, and the major businessmen are examples for a section of the society earning passive income. The mechanism they build is such that the money flow is constant in their account even though they don't function. Some of the forms of passive income are interest income, real estate investments, dividends, royalties, multi-level marketing, and networking.

Both types of revenue require hard work, and for most of us, both types are essential. The difference is that passive income is earned as a one-time activity rather than a regular job. Therefore, passive income should be a priority for achievement, and your active income should be how you achieve this aim. Consider it as the fuel that will drive your trip to a passive lifestyle.