What is the difference between gross income and net income?

Gross income and net income are two important concepts in understanding an individual's or a business's financial performance. Gross income is the total income earned by an individual or a business before any deductions are made. This includes wages, salaries, bonuses, rental income, and any other forms of income. For businesses, gross income may also include revenue generated from sales before accounting for the costs associated with producing goods or services. On the other hand, net income is the amount that remains after all expenses, deductions, and taxes have been subtracted from the gross income. For individuals, net income is often referred to as take-home pay, which is what one actually receives after all taxes and other withholdings are taken into account. In the case of businesses, net income represents the profit earned after accounting for operating expenses, such as salaries, rent, utilities, and tax obligations. Understanding the difference between these two terms is crucial for effective budgeting, personal finance management, and business planning. Those who wish to delve deeper into their personal or business finances can refer to the resources available on the Inland Revenue Department of New Zealand's official web page.