A Study on Investment Income

1661 Words7 Pages
Interest is the amount charged on money credited. This amount is a percentage of the principal borrowed and is computed periodically, often annually. Interest offered by banks and financial institutions is either simple or compound. Simple interest is a percentage of the principal calculated on an annual basis. Compound is the percentage on the principal and previous interests added to the principal, and are calculated annually. Given that there are different types of income like interest income, leasing, rental, and royalty income interest will have different definitions depending on the type of income it is being calculated on. Interest earned from money rent to another nation, is passive income. This is because; this is a percentage of an amount of money, a nation rent to another. Therefore, since the lending nation does not actively labor on the principal amount rent, the interest they earn from the rent money is passive income. The principal rent to the borrower is active income, for the borrower is actively laboring or using the capital to increase returns and pay the interest. Interest is passive income, since it is money the lending nation receives with little or no effort. Interest income various across nations and their laws. Interest income in Japan is very generous as $56,000 per taxpayer is tax exempted. Interest income in the UK is incorporated into the total individual income and is part of the global income, but in Japan, it is treated as the nominal
Open Document