Net income is a business's profit after all expenses, the bottom line remaining once revenue is reduced by cost of sales, overhead, interest and tax.
Net income, the "bottom line", is what is left after every expense is subtracted from revenue. It is the final figure on the income statement and the measure most people mean by "profit". Retained in the business, it increases equity through retained earnings; distributed, it becomes dividends.
Accounting net income and taxable income are not the same. The T2 starts from accounting net income and then adjusts for differences, adding back non-deductible items like the 50% of meals, replacing book depreciation with CCA, and so on, to arrive at the income actually taxed.
A company earns $400,000 in revenue and incurs $360,000 in total expenses. Its net income is $40,000. After tax adjustments on the T2, its taxable income may differ from this accounting figure.
Our certified accounting firm handles this for businesses and individuals across Canada, at fixed fees with no surprises.
Book a Free 15-Minute CallNet Income Frequently Asked Questions
Common questions regarding our compliance workflows and service guarantees.
What Canadians Search About Net Income
The questions Canadians actually search on this topic, answered plainly. Browse every question in the Canadian tax answers directory.
HST combines the 5% federal GST with a provincial component in five participating provinces. For 2026 the combined rates are 13% in Ontario, 15% in New Brunswick, Newfoundland and Labrador, and Prince Edward Island, and 14% in Nova Scotia since 1 April 2025. Elsewhere you charge the 5% GST alone, or GST plus a separate provincial tax. The rate follows the province of supply, not where your business sits.
Income tax is tax charged on the income you earn in a year, levied by both the federal government and your province or territory. Rates are graduated, so successive slices of taxable income are taxed at higher rates, and credits such as the basic personal amount reduce the tax calculated. Employment income is taxed through payroll withholding and settled on your T1 return. Quebec residents also file a separate provincial return with Revenu Quebec.
Federal income tax is the share of income tax that goes to the federal government, calculated on taxable income using federal brackets and then reduced by federal credits. Your province or territory levies its own income tax on the same income, which is why a paycheque outside Quebec shows one blended deduction rather than two. Employers estimate both when withholding. For your own figure, read the federal tax line on your assessed T1 rather than a rate table.
Canada taxes personal income in bands. Each bracket's rate applies only to the income inside that band, so earning your way into a higher bracket never re-taxes the income below it. Federal thresholds are indexed to inflation annually, and your province or territory applies its own set of brackets on top, which together give your combined marginal rate. Because the figures move every year, use the CRA rate table for the tax year you are filing rather than the current one.
Related Terms
Related Services
Reviewed and fact-checked by Udit Gupta
Ex Big 4 — Ernst & Young, Deloitte · International & cross-border tax specialist · CPA Canada (In-Depth Tax Program) · Chartered accountant, ICAI & MIA
Udit Gupta has over 15 years of experience helping corporations and business owners with corporate structuring, corporate tax filing, bookkeeping, payroll, GST/HST, cross-border tax and CRA representation. Big 4 trained at Ernst & Young and Deloitte, and qualified as a chartered accountant in India and again in Malaysia, he founded his accounting practice in 2014 to serve entrepreneurs, startups and non-resident business owners across Canada. View full member bio.
The Institute of Chartered Accountants of India — member 521458 · Malaysian Institute of Accountants — member CA 44667 · Ex Big 4: Ernst & Young, Deloitte · CPA Canada (In-Depth Tax Program), completed 19 Dec 2023 · In-Depth GST/HST Part I, 12 Jul 2022 · Part II, 5 Jul 2023
Editorial policy. Every page is researched against primary sources — the Income Tax Act, CRA publications and CPA Canada guidance — and every rate or threshold is stated with the tax year it applies to.
Pay after the service
A fixed price first, payment after the work is done
Fill in the form and we come back with a single fixed fee. You approve it, we deliver, and you pay once the service is complete.
- Fixed fee agreed before work starts
- Pay after the service
- Free 15-minute consultation
24/7 Helpline: +1 (416) 619-0068
Secure Fixed Quote
Fill details below to lock in pricing and get started today.
Our Partners Are Alumni of the World's Top Accounting and Tax Institutions
