There are essentially four broad sources of income:
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- Net income from employment: it generally includes salaries, wages, and other remuneration received from employment or office.
- Net income from a business: it means the profit derived from carrying on a business.
- Net income from property: it is the income from an asset held as an investment, such as interest, dividends, royalties, and rental income.
- Other sources of income include various items, such as employment insurance receipts, pension receipts, alimony or maintenance receipts, separation allowances, receipts from registered pension, registered retirement savings plans, deferred profit sharing plans, and various forms of social assistance received.
When the new Income Tax Act was legislated in 1972, taxable capital gains became a different source of income subject to tax.
In order for income to be taxable, it should be derived from a source. If an amount could not be sourced, it was outside the definition of income. That is why gifts, and gambling windfalls are not taxable. Since capital gains are derived from a disposition of capital rather then a source of income, many experts have argued against taxation of capital gains.