Statutory income is a term used primarily in tax law to refer to income specifically defined by statute as subject to tax. This type of income includes all earnings that are legally required to be reported to the tax authorities and is subject to taxation according to the rules and regulations set forth by the governing tax code.
Here are some key points to understand about statutory income:
Legally Defined: Statutory income is defined by law. The tax code or relevant statutes explicitly outline which types of income are considered statutory.
Includes Various Sources: It encompasses various sources of income, such as wages, salaries, interest, dividends, rental income, business profits, and other types of income as specified by law.
Subject to Taxation: Statutory income is taxable, which is included in the calculation of an individual’s or entity’s taxable income, which is then used to determine the amount of tax owed.
Reporting Requirements: Individuals and businesses are required to report their statutory income on their tax returns. Failure to report statutory income accurately can result in penalties and interest on unpaid taxes.
Deductions and Exemptions: While statutory income is the gross income before deductions, taxpayers can subtract certain deductions and exemptions to arrive at their taxable income.
Jurisdiction Specific: The definition and components of statutory income can vary from one jurisdiction to another, as different countries have their tax laws and regulations.