In National Income [Nl) accounts, Personal Income (PI) is defined as

In National Income (NI) accounting, Personal Income (PI) represents the total income actually received by households. To derive PI from NI, several adjustments are necessary. First, undistributed profits and corporate taxes must be subtracted because these portions of factor income are retained by firms or the government and do not reach households [3]. Second, net interest payments made by households (interest paid minus interest received) are deducted, as these represent a flow of income away from the household sector [3]. Finally, transfer payments from the government and firms, such as pensions and scholarships, are added because they constitute income received by households without any corresponding current productive activity [3]. Thus, the complete formula is PI = NI – Undistributed profits – Net interest payments made by households – Corporate tax + Transfer payments to the households from the government and firms [3].

Sources

1. [1] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 6: Open Economy Macroeconomics > National Income Identity for an Open Economy > p. 104
2. [3] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 2: National Income Accounting > NNP ≡ GNP – Depreciation > p. 26
3. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 1: National Income > Other Variants of National Income > p. 10