Meaning of Transfer Income/Transfer Payment:
Transfer Income refers to income received by a person without rendering any productive service in return.
It is a unilateral (one-sided) concept i.e, such income is earned without providing any goods or service in return.
It is not included in National Income as it does not reflect any production of goods and services.
It can be received either within the domestic territory of a country or from abroad.
Examples: Old age pension, Scholarship, Unemployment allowance, Pocket money etc. All these incomes are received without giving any product or service in return.
Let's take the example of Old age pension. In the case of old-age pension, the person gets this income without doing any work (job). This income is generated without any increase in goods or services produced within that year. The person has not produced any goods nor given any service. And since there is no production of goods or services against this income, it is not added to national income.
In the case of transfer income, money just changes hands. But it doesn't lead to the production of any goods/services in the economy. Hence it is not added to the national income as it is just transfer of money from one pocket to another that takes place without production of any goods or services.
Transfer Income refers to income received by a person without rendering any productive service in return.
It is a unilateral (one-sided) concept i.e, such income is earned without providing any goods or service in return.
It is not included in National Income as it does not reflect any production of goods and services.
It can be received either within the domestic territory of a country or from abroad.
Examples: Old age pension, Scholarship, Unemployment allowance, Pocket money etc. All these incomes are received without giving any product or service in return.
Let's take the example of Old age pension. In the case of old-age pension, the person gets this income without doing any work (job). This income is generated without any increase in goods or services produced within that year. The person has not produced any goods nor given any service. And since there is no production of goods or services against this income, it is not added to national income.
In the case of transfer income, money just changes hands. But it doesn't lead to the production of any goods/services in the economy. Hence it is not added to the national income as it is just transfer of money from one pocket to another that takes place without production of any goods or services.
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