Investment income (ROI) | significant effect on tax and income

By | January 20, 2018

What is investment income for tax purposes, example and explanations?

Investment income definition:

Investment income comes from capital gains such as interest payment, dividends, sales of security of assets, stock dividends, mutual fund distributions, bonds. Sometimes investment income called unearned income is the money that you collect from your investment. Your net investment income what you have left over after you subtract your investment expenses. The people who are service holder they earn the large portion of their investment in total net income.  On the other sources, disciplined saving and investment in the financial markets may help to grow decent savings into the large investment portfolio. It depends on investment income formula, what is investment income for tax purpose, types of investment income and investment income example. Its importance of bookkeeping is huge We may discuss whole topics is given below;

The investment incomes in the income statement are an item called investment income or losses, is commonly listed in company Income statement.  On the other hand, Investment income can be received as a lump sum amount or regular interest payments.


Investment income

Types of Investment Income:

In the easiest form, the interest outstanding on a basic savings account is considered as income. The interest is generated as an amount above and beyond the original investments, which are the deposits placed into the account, making it a source of income.

Alternative stocks and bonds can be also creating investment income. Whether this is through regular interest payments or selling a security at a higher rate than it was purchased, the funds above the original cost of the investment qualify as investment income.

Investment Properties:

Some of the people who are investing their money to purchase real estate as a way to increase investment income. Similarly, there is expert through receipts from the tenant as a rent payment. When the rent payment is repaid whole investment by the rent income after that the rent income is counted as an investment income.

Investment Income tax:

The majority of the investment income calculation is as a tax when it’s withdrawn.  The associate’s individual taxpaying rate is relying on the investment generating the income and other characteristics of an independent tax payer’s condition. In provident fund of the company, you may see that most the time when the employee retires from the post then the employee receive provident fund amount but the amount is deducted by the tax in every year calculation. Eligible amount is received from investment income which is called qualified gains.

Investment income has another part of Net investment income which is related to fixed assets which are another named investment assets.

Types of Net Investment Income:

Net Investment income is related to assets such as bonds, stocks, mutual funds, loans and other investment income. The individual tax rates on investment income rely on whether it is dividend income or capital gains or interest income.

When inventors sell assets from their portfolio, the proceeds from the exchange results in either is a realized gain or loss. The realized gain can be capital gain from selling stocks, interest income from fixed income product, the dividend paid to stakeholders of a Company. Rent income received from property, annuity payment, and royalty payment. The difference between capitals realized gain or losses are relying on whether investment income is positive or negative.

Net investment income example:

For example, a person sells 150 shared of BBLP and 50 shares of MNLX for $100 share and 110 shares respectively. He also received coupon payment and also coupon bonds total sum of $2000, in addition to the rental income of $ 10,000. His net investment income is calculated below;

Capital gain from BBLP:


(Sale Price 150 – Cost 100) x 100


Capital loss from NFLX:

(Sale Price 110 – Cost 200) x 50



Brokerage commissions


Interest income


Rental income


Tax preparation fees


Net Investment Income



For the Investment Company or individuals, this is the investment amount left after operating expenses are divided by total investment income and it is normally expressed on a per share basis. To figure out the net investment income per share of the company, divided the total investment income by the share outstanding. This amount is what is available to shareholders as divided s. the publicly traded company must list its net investment income on its balance sheet accounts and the transaction is listed in journal accounts as well as the general ledger accounts.


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