Net taxable income is:

• A. gross pensionable/taxable income less authorized deductions
• B. gross income minus taxes
• C. net pay after deductions
• D. total compensation before taxes

Answer: (A)

Net taxable income is the amount of earnings that remains after subtracting deductions that reduce the income on which tax is calculated. In payroll terms you start with gross pensionable or taxable income, which is the portion of earnings that CRA uses to compute CPP/EI and income tax. You then subtract authorized deductions—like RRSP contributions, registered pension plan contributions, and eligible union or professional dues—these deductions reduce the amount that will be taxed. The result, net taxable income, is the figure used to determine federal and provincial taxes.

This differs from net pay, which is take-home pay after all withholdings including taxes and other payroll deductions. It also differs from total compensation before taxes, which is simply the gross amount earned before any deductions or taxes.