Is Business Income classified as Ordinary income? Business Income is the profit that is earned from the business. It is nothing but Total Revenue/Total turnover minus Total Expense. It encompasses any income realized as a result of an entity’s operations. In its simplest form, it is a business entity’s net profit or loss, which is calculated as its revenue from all sources minus the costs of doing business. The profits from the business are taxable income/business income. Business income is a type of earned income and is classified as ordinary income for tax purposes. It encompasses any income realized as a result of an entity's operations. Income such as interest and dividends from bank accounts, stocks, and bonds are generally not considered business income for a sole proprietor, even if you think of them as reserve funds for business downturns. The way in which business income is taxed differs for each of the most common types of businesses: sole proprietorships, partnerships, and corporations.

Saranya R Kurup

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