How To Calculate Net Income (NI)?

Short tutorial on how to calculate net income (NI). Companys total earnings calculation.

Companys Total Earnings Calculation

Net Income (NI) is the total earnings of the company in a fiscal year. The net income of a company is calculated taking revenues and subtracting the costs of doing business such as depreciation, interest, taxes and other expenses. It is one of the important measures of profit earned by the company over the fiscal year.

To calculate net income of a company, start with their total revenue. Subtract the businesses expenses and operating costs to calculate the businesss earnings before tax. Deduct tax from this amount to find the total earnings by the company.

Formula Used:
Net Income (NI) = Taxable Income - Tax Rate
Taxable Income = Total Revenue - Deductions In this short tutorial, let us discuss on how to calculate the Net Income (NI) of a company using a simple example. Consider a small scale company whose total revenue is Rs.60,000, the overall deduction costs were Rs.10,000. Tax payable is 15%. Calculate the companys net income.

Step 1: Given,
Total Revenue = Rs.60,000
Deductions = Rs. 10,000
Tax = 15% Step 2: Calculate Taxable Income,
Applying the values in the formula,
Taxable Income = Total Revenue - Deductions
Taxable Income = Rs.60,000 - Rs.10,000
Taxable Income = Rs.50,000 Step 3: Calculate Net Income,
Applying the values in the formula,
Net Income (NI) or Total Earnings = Taxable Income - Tax Rate
Net Income (NI) = Rs.50,000 - 15% of 50000
Net Income (NI) = Rs.50,000 - Rs.7,500
Net Income (NI) = Rs.42,500 