Many times I often think: Do we need to pay income tax on the money (profit) we earn in the transaction? The first thing you must figure out is whether the money you earn belongs to capital income Capital Receipts or operating income Revenue Receipts . So what's the difference between the two? Let's compare it to a tree. If you sell a tree, that is capital income Capital Receipts are tax-free. But if you sell the fruit of the fruit tree, it is the business income Revenue Receipts that needs to pay income tax.
difference 1
Revenue receipt: Business income is subject to tax. And capital income Capital Receipt: is not required to pay income tax. (except the money earned by RPGT from buying and selling properties)
difference 2
Revenue receipt: how does it come from? It's the money you make from running the business. Example: If you are currently earning income from buying or selling a business, that is business income. Capital income Capital Receipt: How did it come about? It is the money you make by selling or selling your assets or investments. For example: winning the lottery, selling stocks, cars, houses, etc.
difference 3
Business income Revenue receipt: You receive a sum of money to replace your income (to replace the income you should earn). Example 1: Today you signed a contract with a customer. The customer must buy your product, but he regrets not buying it after signing the contract. If he breaks the contract, he must pay money. Then the compensation you get is your business income, because the compensation replaces what you should have originally. earned income. Example 2: You get compensation because you received the goods late, it has something to do with the operation, that is the operating income. Capital income Capital Receipt: If the sum of money received is compensation, the compensation you do not have that source of income. Liezi: When someone buys your business, it means that you can no longer do your business, and then loses money to you. The compensation you get is your capital income. Because they have cut off your source of income.
difference 4
Revenue Receipt: Allows you to use intellectual property rights such as copyright and then receive copyright fees. For example: if you let people use your copyright or brand, the copyright fee received is business income. Capital income Capital Receipt: Sell your entire brand, patent or copyright completely. For example: if your product brand and patent are sold to others, and you can no longer authorize the copyright fee, then the money from the complete sale is capital income.
difference 5
Revenue Receipt: is recurring. This means that the income is recurring in nature. Capital income Capital Receipt: It is not repetitive. None of these revenues are recurring in nature.