Difference between active income and passive income: A To Z

Difference between active income and passive income will only help you if put aside every piece of knowledge you know before reading so that you can gain new knowledge. Let’s start.

What is active income?

Basically, active income is income in which you trade your time to earn money. That means when you work you will get money and if you don’t work you will not get a single penny got it.

You work for money in one line if I want to say about active income.

What is the other name of active income?

Active income is also called earned income.

What are active income examples?

A common example of active income is doing a job and in the society where we live getting a job is like achieving a gold medal in the Olympics for many people seriously they get so much excited when anyone in their family gets a new job.

But after as you go ahead with the article and your job you will get to know why doing the job is not an actual way to enjoy and live your life. Actually, you say that relying on active income is wrong.

Some examples of active income are as follows:-

  1. For all jobs ( discussed above I know 😜 ) if you get a salary in return for the work you do that will be counted as an active income
  2. Tips
  3. Commission from sales
  4. Freelancing
  5. Tutoring
  6. Self-employed

You have to keep in mind that if you are trading your time with money and you are actively involved in that process to earn money all that work will go under active income.

Pros of active income.

  1. You can start your active income on day one ( if you are giving tuition to students ).
  2. It is easy to earn an active income.
  3. You have fixed hour of daily work
  4. You can enjoy the rest of your time after coming back home

Cons of active income.

  1. You can’t demand more money if you work harder than last time
  2. You have to wait for a long time to increase your payment
  3. Your life is in your boss’s hands ( you can’t enjoy your life or go on vacation when you want )
  4. If you will not go to work you will not be paid
  5. Most people will fire you because you have taken lots of leave no matter how much valid the reason may be
  6. Your job is not secure you don’t know when is your last day at that job
  7. No routine no focus on health

What is passive income?

Passive income is something that you get paid although you are not actively involved in that process. In simple words either you have to work very less or you don’t work for that then also you will get paid because you built that ecosystem.

Money works for you if I want to say about passive income.

What are passive income examples?

One of the best examples of passive income is running a business but here is the catch if your business doesn’t need your presence that will be counted as passive income.

But if you are running in business and you are actively involved day and night that will be counted as active income, not passive income okay.

Some of the passive income examples are as follows:-

  1. Business ( which runs without your presence or very minimum presence )
  2. Renting a house or shop
  3. Selling books
  4. Investing in the stock market
  5. Getting divided from stocks
  6. Network Marketing ( yeah you can’t deny the power of network marketing )
  7. Content creation
  8. Selling a courses
  9. Becoming a business partner
  10. Running an institute

Pros of passive income.

  1. You earn as much money as you want
  2. You can retire at an early age
  3. You can follow your hobby or passion
  4. You can peacefully enjoy your life with your family
  5. You can explore new career opportunities

Cons of passive income.

  1. You need to give time to build an ecosystem to make money from passive income
  2. It can be challenging to create a passive income
  3. You have to be ready to work 12-14 hours ( no traveling hours counted ) a day for months or years. This is how business and other passive income are built.
  4. There is a high risk of failing a passive income
  5. You are solely responsible for each and everything in your work
  6. You are liable for the losses if you own a business or anything

Difference between active income and passive income

Sr NoActive IncomePassive Income
01.It is easy to start active incomeIt is time taking to generate passive income
02.More than 95% of people earn and live their life with active incomeOnly 5% or fewer people have passive income
03.You need to give almost 3-4 decades ( 30-40 years) then also you can’t retire happilyYou need to give 5-10 years and retire at early age happily
04.It’s not challenging to work on a job ( don’t get me wrong I do respect your work a lot but compared with the business you too will agree)It is very challenging to start and create a passive income
05.Fixed time to workNo fixed time (unless you organize it )
06.No focus on HealthYou can give time to health
Difference between active income and passive income

Is active income and passive income taxable?

Yes, active income and passive income both are taxable but some income are not taxable. For example, agricultural income is the best example which is not taxable.

Can I earn both incomes at one time?

Yes, you can do that. But you have to work with your job. In short, you need to do a side hustle with your job so that you can create a passive income it will be tough not demotivating you but talking reality.


What is better active income vs passive income?

If you want instant money in months so your active income is better but if you want money for a longer period passive income is better.

Why passive income is better?

It helps to create your own life according to you.

What is the most common type of income?

Active income is the common type of income that everyone has. Whether it is a worker, employee, or CEO of the company everyone earns active income.

Read More

  1. How to become a millionaire
  2. Reasons for leaving a job

I hope you like the difference between active income and passive income. Share with your friends because sharing is caring. Comment below your problem related to personal finance I will love to write an article on that particular topic if possible.

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