CLASS XII ECONOMICS NATIONAL INCOME

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CLASS XII ECONOMICS NATIONAL INCOME
ITEMS INCLUDED IN NATIONAL INCOME
NO.                HEADING                                              REASON
1 Addition to Stock               It adds to the Gross Domestic Capital Formation
2 Broker’s commission of sale of old car                service provided by broker are considered productive
3 Construction of a new bridge by Govt.                    It adds to the Gross Domestic Capital Formation
4 Construction of a new house                         It adds to the Gross Domestic Capital Formation
5 Contribution to SSS by Employer                          Part of compensation given by the employer
6 Direct purchases made abroad by Govt.                       Part of Govt. Final Consumption Expenditure
7 Dividend received by an Indian from his investment in shares of foreign co.             Part of Factor Income From Abroad
8 Earnings of a college student working part time             It is related with the production activity
9 Earnings of a Doctor operating his own clinic             It is part of Mixed Income under Income Method
10 Examination fees paid by students             Part of Private Final Consumption Expenditure
11 Expenditure incurred by Foreign tourists visiting Taj Mahal             It become part of Export of Services (Tourism)
12 Expenditure on construction of a new house             It adds to the Gross Domestic Capital Formation
13 Expenditure on education of children by a family             Part of Private Final Consumption Expenditure
14 Expenditure on improvement of a fixed capital asset             It adds to the Gross Domestic Capital Formation
15 Expenditure on purchasing new assets             It adds to the Gross Domestic Capital Formation
16 Food eaten by Foreign Tourists in India             It become part of Export of Services (Tourism)
17 Free clothes given to employees             Part of compensation given by the employer
18 Free Education provided by Govt to poor             Part of Govt. Final Consumption Expenditure
19 Free medical facilites given to employees             Part of compensation given by the employer
20 Govt. expenditure on Street Lighting             Part of Govt. Final Consumption Expenditure
21 House rent allowance given by employer             Part of compensation given by the employer
22 Imputed rent of owner-occupied factory             It is related with the production activity
23 Imputed rent of self occupied house             Services enjoyed similar to rented house
24 Insurance premium paid by employees             Part of Private Final Consumption Expenditure
25 Interest on loan waived off by employer             Part of compensation given by the employer
26 Interest on own capital             It is related with the production activity
27 Interest paid by banks on saving A/c & FDs             Money received was used by bank for productive activity
28 Interest received on debentures             Debentures are a type of loan taken by a Company
29 Maintenance of Free Dispensaries by Govt.             Part of Govt. Final Consumption Expenditure
30 Minerals extracted from the earth in an year             It is related with production actity
31 New Refrigerator purchased by household             Part of Private Final Consumption Expenditure
32 Payment of Bonus             Part of compensation given by the employer
33 Payment of bus fare by households             Part of Private Final Consumption Expenditure
34 Payment of Retirement             Pension Part of compensation given by the employer
35 Payment of telephone bill             Part of Private Final Consumption Expenditure
36 Paymet of Interest on loans by Comm. Bank             Loans taken by bank are for commercial purpose
37 Petrol bought for scooty by XII class girl             Part of Private Final Consumption Expenditure
38 Production for self-consumption             It is related with the production activity
39 Profit earned by Indian co’s branch abroad             Part of Factor Income From Abroad
40 Profit of branch of Indian bank in London             Part of Factor Income From Abroad
41 Purchase of a new Taxi by a Taxi Operator             It adds to the Gross Domestic Capital Formation
42 Purchase of equipments for a factory             It adds to the Gross Domestic Capital Formation
43 Purchase of Furniture / Machinery by a firm             It adds to the Gross Domestic Capital Formation
44 Rent free home given by employer             Part of compensation given by the employer
45 Rent received by Indian residents on their building rented out to foreigners             Part of Factor Income From Abroad
46 Royalty received by an author             It is a productive income & part of Operating Surplus
47 Subsidized fertilizers and seeds to Farmers by Govt.             Part of Govt. Final Consumption Expenditure
48 Subsidized Lunch provided to employees             Part of compensation given by the employer
49 Television purchased by me from a shop             Part of Private Final Consumption Expenditure
50 The cost of adding a new floor to office building             It adds to the Gross Domestic Capital Formation
51 Tractor purchased by a Farmer             It adds to the Gross Domestic Capital Formation
52 Wages received by Indian working in Foreign embassies in India             Part of Factor Income From Abroad
53 Water Pump purchased by a Farmer             It adds to the Gross Domestic Capital Formation
54 Whole family working on owned agricultural land             Imputed salaries of the workers will be added

ITEMS INCLUDED IN DOMESTIC INCOME
NO.                         HEADING                                        REASON
1 An aeroplane operating between Indonesia and Sri Lanka             owned by resident Indian Within the domestic territory
2 Consultancy fee paid to a foreign expert situated in Calcutta             Within the domestic territory
3 Earnings of HSBC Bank located in Amritsar             Within the domestic territory
4 Pension on retirement             Within the domestic territory
5 Profits earned by a company in India owned by an NRI             Within the domestic territory
6 Profits earned by a company in India partly owned by resident Indian and partly by Foreigners             Within the domestic territory
7 Profits earned by branch of foreign bank in India             Within the domestic territory
8 Salaries paid by a foreign company located in Delhi             Within the domestic territory
ITEMS NOT INCLUDED IN NATIONAL INCOME
NO.                        HEADING                                            REASON
1 Advertisement expenses by a firm              Intermediate consumption
2 An Indian working in Australia sending money to his family living in India             It is part of transfer income
3 Capital gain on sale of building, land etc.             Does not add to the flow of goods or services
4 Capital gain to an Indian resident from sale of shares of a foreign company             Does not add to the flow of goods or services
5 Capital loss due to earthquake or flood             Does not affect national income directly
6 Chemicals purchased for scientific research             Intermediate consumption
7 Dividend received by a foreigner from his investment in shares of Indian co.             It is subtracted as Factor Payment Paid To Abroad
8 Dividend/ Interest paid by one firm to another             Already included as a part of Profit (In Income Method)
9 Electricity bill paid by a school             Intermediate consumption
10 Entertainment tax recd. By Govt.             Compulsory transfer payments imposed by Govt
11 Expenditure on repair of fixed assets             Intermediate consumption
12 Expenses on entertaining business guests             Intermediate consumption of the firm
13 Expenditure by father on marriage of his daughter             Does not add to the flow of goods or services
14 Fertilizers purchased by a farmer             Intermediate consumption
15 Festival gift given by an employer             It is part of transfer Payment
16 Financial help received by earthquake victims             It is part of transfer income
17 Gifts received from abroad or any friend             It is part of transfer income
18 Goods lying within the production boundary             They are part of Intermediate Goods
19 Increase in price of shares lying with a trader             Does not add to the flow of goods or services
20 Insurance money received as claim             It is part of transfer income
21 Interest paid by household to the banks             Interest on loans for consumption purpose not included
22 Interest received on loan given to a friend to buy a car             Loan amount used for only personal consumption
23 Milk purchased by dairy shop             Intermediate consumption
24 Mineral Wealth of a Nation             It is a part of National Wealth and not National Income
25 National Debt Interest             Interest on loans for consumption purpose not included
26 Old age pension             It is a transfer payment made by Govt.
27 Payment of Fees to an advocate hired by a firm             Intermediate consumption ( By one firm from another )
28 Payment of interest on borrowings by general government             It is non-factor payment as general govt. uses the loan amount on consumption unless specified otherwise
29 Petrol used by Govt. or Army Vehicles             Intermediate consumption
30 Profit earned by foreign bank in India             It is subtracted as Factor Payment Paid To Abroad
31 Property inherited from father sold out             It is an already existing object (included when it was new)
32 Purchase of bread by school canteen             Intermediate consumption
33 Purchase of house by the tenant             Already included when they were sold as new
34 Purchase of raw material by firm             Intermediate consumption
35 Salaries paid to russian workers working in Indian Embassy in Russia             It is subtracted as Factor Payment Paid To Abroad
36 Sale/Purchase of second hand car or machine             Already included when they were sold as new
37 Sale/purchase of shares, bonds, debentures             No production takes place, only paper claim
38 Scholarship given to India student studying in India by a Foreign Company             It is part of transfer Payment
39 Service of a mother or a housewife             Non economic in nature, difficult to judge their value
40 Transfer Income and Payments             Not connected to any production activity
41 Vegetables purchased by restaurant             Intermediate consumption
42 Wealth tax, Custom duty, excise duty, Sales tax             Compulsory transfer payments imposed by Govt
43 Winning lottery, horse race, contests etc.             No production takes place (Windfall Gain not included)

ITEMS NOT INCLUDED IN DOMESTIC INCOME
NO.                           HEADING                                                    REASON
1 Consultancy fee paid to a foreign expert situated in California (USA)             Outside the domestic territory
2 Factor Income from Abroad             Outside the domestic territory
3 Old age pension given by the Govt.             It is part of transfer Payment
4 Profits earned by a branch of SBI located in Amsterdam             Outside the domestic territory
5 Profits earned by Indian employees working in the Brazil’s embassy in India             Outside the domestic territory
6 Profits earned by Indian resident from his company located in Austria             Outside the domestic territory
7 Rent paid by embassy of China in India to a resident Indian             Outside the domestic territory
8 Rent received by and Indian from his properties situated in Dubai             Outside the domestic territory
9 Salaries of Indian workers working in French Embassy in India             Outside the domestic territory
10 Salaries paid to resident Indians working in the USA embassy in India             Outside the domestic territory
11 Scholarships given by Govt. to Students             It is part of transfer Payment

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