Individuals need to classify their incomes into 10 categories and fill out their tax return. Individuals means taxpayers like an employee and self-employed that are not a member of any corporate organization. It is very complicated for individuals to classify their incomes into 10 categories.
The 10 categories and examples are as follows:
1. Business income (Sales, Agriculture etc)
Income derived from independent enterprises such as trading, manufacture, fishery, agriculture, self-employed person, etc.
2. Real estate income
Income derived from leasing of land, buildings, ships, aircraft, etc.
3. Interest income
Income from interest paid abroad and in Japan on deposits and savings, etc.
4. Dividend income
Income from dividends of surplus received from corporations and distribution of profit from publicly offered stocks securities investment trusts, etc.
5. Employment income
Income of salaries, wages, bonuses, allowances, etc.
6. Miscellaneous income
Public pension, others
7. Capital gain
Income derived from transfer of land, buildings, gold, machinery, etc.
8. Occasional income
Income of lump-sum payments from life insurance policies, prize money, lottery winnings, etc.
9. Timber income
Income derived from transfer of logged forests(timber), which have been owned for a period exceeding five years, etc.
10. Retirement income
Income of retirement allowances, etc.
The reason why incomes are classified into 10 categories is that each income has different reasons to be derived.
These incomes are categorized according to their sources.
For example, retirement income is based on the income which an employee earns because of working for several years in same company. Employment income is based on the income which an employee earns for a year. Prize money is categorized into occasional income, an income without labor. It is considered that our government should ease the tax burden on the people who earn retirement income and occasional income. So, there are 10 ways to calculate for taxable income and tax payment.
