Personal Income is the part of National Income which is received by the households.
The formula for calculating Personal Income (PI) is
Personal income (PI) ≡ National Income – Undistributed profits(profits utilised by manufacturers for further production) – Net interest payments made by households – Corporate tax + Transfer payments to the households from the government and firms(old-age pensions, unemployment compensation, relief payment etc.).
- Undistributed profits – these are the profits which is not distributed to the households
- Corporate Tax – It also does not accrue to the households