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National Income at Current Price and Constant Price
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Treatment of Different Items in Domestic Income

Last Updated : 06 Apr, 2023
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Domestic Income of an economy consists of income earned, i.e., only factor income and not transfer income by all the production units whether they are residents or non-residents, located within the domestic territory of the country, as the reward of their productive services or contribution to the flow of goods and services in the current year.

It is not always necessary that all the items that are included in the domestic income of India are also included in the national income. Similarly, it is also not always necessary that all the items that are included in national income are included in domestic income. It is so because only the income of normal residents irrespective of their place of earning is included in national income; however, the income of both residents and non-residents within the domestic territory of the country is included in domestic income. 

Examples of Items included in National Income, but not in Domestic Income

1. Salary received by an Indian employee working in U.S. Embassy in India.

The salary received will be included in the national income as the employee is an Indian resident. However, this income will not be included in the domestic income of India, as the U.S. Embassy is not a part of India's domestic territory.

2. Profits of a branch of Punjab National Bank in Hong Kong.

The profits earned by the branch of PNB in Hong Kong will be included in the national income of India, as it is a part of the factor income from abroad. However, these profits will not be included in India's domestic income as the PNB's branch in Hong Kong is not a part of India's domestic territory.

Examples of Items included in Domestic Income, but not in National Income

1. Rent received by an Indian company, which is owned by a non-resident.

The rent received by the Indian company will be included in domestic income,  as it is received within the domestic territory of India. However, the rent will not be included in national income because this transaction is a part of the factor income paid abroad.

2. Profits earned by a foreign bank's branch in India.

The profits earned by a foreign bank's branch in India will be included in domestic income as it is received within the domestic territory of India. However, the profits will not be included in national income because this transaction is a part of the factor income paid abroad.

Treatment of Different Items in Domestic Income

Determine whether the following items will be included in the Domestic Income of India or not.

1. Profits earned by a foreign company in India.

2. Rent received by an Indian from his property in Japan.

3. Rent received by an Indian resident from the Japanese Embassy in India.

4. Compensation of employees to the residents of the U.S. working in the Indian embassy in the U.S.

5. Capital Gains.

6. Services rendered by housewives.

7. Windfall Gains.

8. Payment of bonus by a firm.

9. Broker's Commission on the sale of an old bike.

10. Scholarship given by the Indian Government.

11. Remittances from a non-resident Indian to his family in India.

12. Compensation given by an insurance company to an injured employee.

13. Purchase of goods by foreign tourists.

14. Expenditure on old age pensions by the government.

15. Financial sale and purchase of bonds, shares, and debentures.

Answer:

1. Yes. As they are earned within the domestic territory of India, they will be included in the domestic income of India.

2. No. As the rent is received outside the domestic territory of India, it will not be included in the domestic income of India.

3. No. As the rent received by the Indian resident from the Japanese Embassy in India will be a part of the factor income received from abroad because the Japanese Embassy do not come under the domestic territory of India, it will not be included in the domestic income of India 

4. Yes. As they are earned by the Indian Embassy which comes within the domestic territory of India, they will be included in the domestic income of India 

5. No. As capital gains arise when there is a rise in the price of assets and do not add anything to the flow of goods and services in the economy, they will not be included in domestic income.

6. No. As it is not possible to determine the market value of the services rendered by housewives, they are not included in domestic income.

7. No. As windfall gains do not add anything to the flow of goods and services in the economy, they will not be included in domestic income.

8. Yes. As payment of bonus by a firm is a part of the compensation of employees, it will be included in domestic income.

9. Yes. Broker's Commission is the income received by the broker in return for the services rendered by him; therefore, it will be included in domestic income.

10. No. Scholarship given by the Indian Government is a transfer income and not earned income; therefore, it will not be included in domestic income.

11. No. remittances from a non-resident Indian is a current transfer from abroad; therefore, it will not be included in domestic income.

12. No. The compensation is given by the insurance company to an employee and not by the employer; therefore, it is not included in domestic income.

13. Yes. The purchase of goods by foreign tourists means the export of goods produced in the domestic territory; therefore, it will be included in domestic income.

14. No. As the old age pensions are given by the government as a transfer payment, it will not be included in domestic income.

15. No. As the financial sale and purchase of bonds, shares, and debentures do not contribute to the production of goods and services of India, they will not be included in the domestic income of India.


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    Every nation has a unique currency that it uses for commerce and business, in India, it's Indian Rupee, but what about the global market? The lack of flexibility of the currencies makes them a barrier to international trade. The Foreign Exchange Market was formed to solve this problem. This is a spe
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    Fixed Exchange Rate System | Meaning, Methods, Merits and Demerits
    A medium of exchange for goods and services is called currency, which is different from one country to another country. However, a country’s currency cannot be used in another country. For this purpose, the currency of one country is converted into the currency of another country, and the rate
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    A medium of exchange for goods and services is called currency, which is different from one country to another country. However, a country’s currency cannot be used in another country. For this purpose, the currency of one country is converted into the currency of another country, and the rate at wh
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    Devaluation of Currency| Meaning, Reasons, Effects, Example and Critical Evaluation
    Sometimes there arise some situations when the value of the domestic currency tends to increase drastically and faces monetary barriers. The government and the central bank intervene with some effective monetary policies for the correction of exchange rates, trade deficits, etc. One of these practic
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    Depreciation of Currency : Effects, Examples and Critical Evaluation
    What is Depreciation of Currency?Currency Depreciation refers to a decrease in the value of a currency as compared to other currencies in a floating exchange rate system. Market forces of demand and supply work towards the depreciation of the currency and determine a currency depreciation rate. The
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    Devaluation and Depreciation are two examples of a situation when the value of domestic currency falls in terms of foreign currencies. Even though both include a reduction in the value of domestic currency, the way in which it happens is different. What is Devaluation? Devaluation means deliberately
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    Balance of Payment and its Components: Capital and Current Account
    Usually, government records all the transactions that arise between a country and the outside world. This record is titled Balance of Payments. Balance of Payments can also be known as the Balance of International Payments. It is a statement of all transactions between entities in one country and th
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    Important Formulas

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    CBSE Previous Year Papers (2020)

    CBSE Class 12 Economics Solved Question Paper 2020 - Set 1
    Economics (Code No. 58/1/1)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 (Set 58/1/2)
    Economics (Code No. 58/1/2) Time allowed : 3 hoursMaximum Marks: 80General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are v
    15+ min read
    Class 12 Economics Solved Question Paper 2020 (Set 58/1/3)
    Economics (Code No. 58/1/3)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 - Set 2
    Economics (Code No. 58/2/1)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 - Set 2 (58/2/2)
    Economics (Code No. 58/2/2)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 - Set 2 (58/2/3)
    Economics (Code No. 58/2/3)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 - Set 3
    Economics (Code No. 58/3/1)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 - Set 3 (58/3/2)
    Economics (Code No. 58/3/2)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 - Set 3 (58/3/3)
    Economics (Code No. 58/3/3)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 - Set 4 (Code No. 58/4/1)
    Economics (Code No. 58/4/1)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 - Set 4 (58/4/2)
    Economics (Code No. 58/4/2)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 - Set 4 (58/4/3)
    Economics (Code No. 58/4/3)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 - Set 5 (58/5/1)
    Economics (Code No. 58/5/1)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 - Set 5 (58/5/2)
    Economics (Code No. 58/5/2)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
    CBSE Class 12 Economics Solved Question Paper 2020 - Set 5 (58/5/3)
    Economics (Code No. 58/5/3)  Time allowed : 3 hoursMaximum Marks: 80 General Instructions:  Read the following instructions very carefully and strictly follow them :  (i) This question paper comprises two sections - A and B. All questions are compulsory.  (ii) Question numbers 1 – 10 and 18 – 27 are
    15+ min read
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