Income tax is the branch of tax law that relate to the taxation of the income or profit generated.
For a corporation, income is generally measured when allowable expenses (such as the cost of salaries) and other permitted deductions (such as a measure of the depreciation of capital assets) are subtracted from the revenues (such as sales) in arriving at the amount that is subject to taxation. The state would then take a portion of that amount.
For individuals, income is measured in a similar manner. Revenue would include employment income, income generated from assets (such as a rental property), dividends received and the capital gains on the sale of an asset (such as from the sale of a house, the sale of a business or the sale of shares).
The rate of tax is often different depending on the nature of the income and the status of the entity earning the income. Some tax systems have a different tax rate for small businesses and large businesses. Some jurisidictions have a lower rate of tax for capital gains in comparison to income taxes.
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