Difference between gross income
and net income | Meaning and Definition

What is Gross Income and Net Income? 

Gross income: Gross income means the total amount of income one makes. In the case of gross income, no amount of taxes will be deducted from the paycheck. The gross income can come from any possible source, and all those amounts coming from different kinds of sources will be added to the amount of gross income. Basically, one’s total paycheck amount before deducting the taxes is known as gross income.

Here is the formula for counting gross business income:

Gross income=Gross Revenue-COGS (Cost of Goods Sold) 

Net income: Net income basically means the amount of money one has after deducting all the interest, taxes, and other expenses like that from the total paycheck or from the total income, which can come from various different places. Net income is considered and counted as one’s actual income. The same theory applies in the case of companies and business institutions.

Here is the formula for counting one’s net worth:

Net income (NI)= Revenue-Expenses, interest, and taxes.

Difference between gross income and net income

In the aforementioned descriptions of gross income and net income, most of the differences are described there. When the product’s profit is subtracted from the production and shipping/distributing cost, in this way, the gross profit or the gross income of the company is found.

But net income is counted in a different way. In the case of net income, not only the distributing and producing costs are deducted. In this case, all the expenses and taxes are deducted from the final profit, and thus net income is counted.

These are the basic differences between gross income and net income.

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