A category of income (in addition to portfolio income and passive income) that is generated from job holding or business venture with active or direct participation. This involves direct management of investment or active decisions making. Contrary to passive income, active income is not earned with minimal effort or management (such as dividends from stocks or rental income). While active income requires more direct hands-on work, passive involvement automatically generates income without the income earner’s direct contribution of efforts and time.

As a source of income, active income represents money earned from active involvement with a job or venture, while extending continuous efforts, decision-making, and time commitment of a person (natural person). Essentially, active income is specifically linked to the time and efforts a worker or investor contributes in making decisions, monitoring markets, and adjusting investment or portfolios to achieve higher returns compared to those received from passive income.

Active income is specially derived from daily trading, real estate flipping and active fund management. Daily trading involves buying and selling stocks frequently to capitalize on short-term price movements. Real estate flipping is the process of purchasing properties for the purpose of renovating and selling them for a profit.

Active fund management is about managing a portfolio of investments, such as mutual funds or hedge funds, with frequent buying and selling decisions. Income from managing a portfolio differs from portfolio income in the sense that portfolio income represents earnings/ proceeds received from investments and assets in the form of dividends, interest, and capital gains. Portfolio income also includes royalties received from investment property.

Examples of active income include wages, salaries, bonuses, commissions, tips, and net earnings from self-employment. Jobs or careers that generally produce active income include doctors, engineers, teachers, salespersons and auditors. Income that is generated from self-employment, including consulting, freelance work and running own business, also belongs to the category of active income.