Personal Disposable Income

As discussed above, personal income is the total of all current income received by households of a country in a given period of time, usually a year. All income received by the individuals and households is not available is not available to them for consumption or saving. The Govt. imposes taxes on income and property of the households. After paying these taxes, what is left over is the disposable income. It is the part of personal income which the households spend the way they like. Generally a part of the disposable income is spent and a part is saved.

Definition

According to Peterson, “Disposable income is the income remaining with individuals after deduction of all taxes levied against their income and their property by the Govt.”

Disposable income is the spendable income of the households. They actually spend a part and save the other part. It is estimated by deducting direct taxes and miscellaneous receipts of the Govt. in the form of fees, fines etc. paid by the individuals from their income.

Disposable Income = Personal Income – Direct taxes – Miscellaneous receipts of the Govt. administrative departments (fees and fines paid by the individuals)