Types of Income Average Millionaires Have and You Can Also Grab
I am sure those of you who are reading this article might adore money.
We must love and respect money. Money is a symbol of power, name and fame. It is the foundation of our economy. And money should circulate in our life in abundance.
Sources of income are divided into two parts i.e active and passive. In case of active income, we have to devote our time regularly. Whereas in the case of passive income we have to work hard for a few months or years then we will be enjoying the benefits without working for it. Many people say to start a passive income it doesn’t take time or work but this is not true. Remember, there is no shortcut.
It has been observed that an average millionaires have seven streams of income. I am sure you might be having some of these as your sources of income. In this article, we will look at not only the four but eight sources of income. So, let’s see what are these sources of income.
Almost 90 to 95% of people around the world depend on earned income. Earned income is also known as salary income. To earn this income we have to dedicate our time on a daily basis.
Some people even earn on a daily or weekly basis. But to earn this type of income you have to spend your time. So, in other words, if you don’t work you will not get paid. This type of income is the most common source of income. Even big firm’s CEO, CFO, CA, Doctor, Freelancer, Lawyer etc all come under this category. And employees have to pay income tax to the government based on his/her income bracket.
This is the easiest way of earning income. Under this category, you lend or invest money either to banks as fixed deposit, savings account or government bonds, PPF, post office schemes etc.
Only drawback is the interest rate is very low. So, if you want to earn higher returns you have to deposit a very large sum of money. For example, if you check the interest rate on fixed deposits of Indian banks, most of them don’t give higher than 7% per annum. So, if you deposit Rs. 1,00,000 then you will get only Rs. 1,07,000/- after completion of one year. But the good news is you will not be charged any tax based on this income up to a particular limit.
Have you ever purchased any equity shares of any company? If so then you will get a dividend from the company whenever they will declare the profit. Dividend is based on the number of shares you hold.
This is one of the favourite methods of Mr. Warren Buffett who owns more than 60 subsidiaries companies. He is considered as the greatest investor of all time. And the best part is income from the company’s dividend up to Rs. 10 lakh is exempted from tax in India.
Even income from mutual funds are exempted up to a particular limit. So, guys if you get the chance to acquire some equity shares then go ahead but understand the nature of the company before your purchase.
Transactional income is those types of income in which you procure goods or services at some price or even for free then you resale it. Under this income, most of the time you get some commission based on the total value of the product.
For example, you work as a real estate broker and sell apartments to the customers. Once you break the deal with customers you will get your commission. Even people who are stockist, affiliate marketer, financial transactional app, eCommerce sites all come under this category.
Under this category, again the income is divided into two parts i.e active and passive ways. So, where you are doing everything by yourself like making a painting and selling it is an active source of income. Whereas if you resale online courses of someone as in the case of affiliate marketing you will get commission and you can automate the entire process.
Now let’s talk about taxes. All transactional income comes under income from other sources, if you’re doing them under personal level. And taxes are the same as in the earned income category. But if you open a firm then taxes will be applicable only on the profits. To know more contact a Chartered Accountant.
Again this is another easy source of income. Whenever we hear the word rental, most of us will think about income from renting our property. But in today’s world, you can rent almost anything which you like. For example - you can rent your camera, bike, land, vehicle etc. You have to make sure that those items which you are renting shouldn’t be on EMI. Because if they are damaged you will have to bear a heavy loss.
Royalty income is also a good source of income for many people. Under these people work and develop their original work. And whenever someone uses that property or work they have to pay royalty to the inventor. People have to pay payments for the use of copyrighted work, franchise, patents, natural resources etc.
For example, when an author writes any book. Right to sell those books goes to the publishers but whenever that book is sold, the author will be paid royalty income.
Capital Gain Income
Capital gain income is mainly related to land, property and stock. Suppose you purchase one land of Rs. 30 lakh /- and after 5 years the value of land increases up to Rs. 40 lakh and you decide to sell it. Then Rs. 10 lakh is your capital gain income.
Here, you have to understand if you decide to purchase another land of Rs. 35 lakh which you can purchase from your recent gain, then there will be no tax applicable to you.
Under this type of income, you acquire a customer and then once they become your customer you sell them various products. For example, a Digital Marketer who is involved in selling different courses to his students earn recurring income. More such examples are - Life Insurance Corporation (LIC) agent, franchise-based business model, membership club, ClickFunnel software, Hotstar, Netflix etc.
Which Sources Of Income Do You Have?
So these are the different sources of income of millionaires. As a normal human being, we should also try to replicate some of these methods. We should build multiple sources of income because we never know how the economy and environment will change.
Therefore, it’s always better to have multiple sources of income. I have started my journey in this direction but am still working on it. I believe I can reach my target by this year-end.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2020 Vikram Brahma