What are the three main categories of taxable income?

What are the three main categories of taxable income?

• A. Employment income, property income, and profits from trading
• B. Rental income, savings interest, and dividends
• C. Wages, bonuses, and capital gains
• D. Freelance income, pensions, and gifts

Answer: (A)

The three main categories of taxable income are employment income, property income, and profits from trading. Employment income encompasses wages, salaries, bonuses, and any other compensation received from employment, reflecting the earnings acquired through active work. Property income includes the earnings derived from property, such as rental income from real estate. This category highlights the revenue generated from owning and leasing out residential or commercial properties. Profits from trading relate to income generated from commercial activities, including businesses or trades. This covers gains made from buying and selling goods or services, demonstrating the profit-making aspect fundamental to taxable income. The other options include categories of income that do not comprehensively cover the broader definitions of taxable categories; for instance, rental income and savings interest, mentioned in another choice, are subsets of property income and may not encompass all potential taxable earnings from an employment or trading perspective. Similarly, freelance income and pensions represent specific sources of income but lack the fundamental categories that highlight overall taxable income comprehensively. By focusing on these three main categories, one gains a clearer understanding of the broad scope of taxable income.

The three main categories of taxable income are employment income, property income, and profits from trading. Employment income encompasses wages, salaries, bonuses, and any other compensation received from employment, reflecting the earnings acquired through active work.

Property income includes the earnings derived from property, such as rental income from real estate. This category highlights the revenue generated from owning and leasing out residential or commercial properties.

Profits from trading relate to income generated from commercial activities, including businesses or trades. This covers gains made from buying and selling goods or services, demonstrating the profit-making aspect fundamental to taxable income.

The other options include categories of income that do not comprehensively cover the broader definitions of taxable categories; for instance, rental income and savings interest, mentioned in another choice, are subsets of property income and may not encompass all potential taxable earnings from an employment or trading perspective. Similarly, freelance income and pensions represent specific sources of income but lack the fundamental categories that highlight overall taxable income comprehensively. By focusing on these three main categories, one gains a clearer understanding of the broad scope of taxable income.