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Official acts and guides shed light on what kinds of income there can be and distinguish between taxable and non-taxable income. However, I could not find any definition or even a hint of what is income and what is not income, even in the Income Tax Regulations. As far as I understand, the Regulations only list "Inclusions" (the amounts that are definitely income) and "Deductions" (the amounts that are income but can be deducted).

For example, if I return an item to the store, I receive a refund. Common sense tells me that it is not income, but is there any document that says so?

Other examples may include giving and collecting a loan (without interest), receiving a monetary compensation from a stranger who spilled coffee on your laptop and similar.

My question is specific to Canada, but answers for other jurisdictions are welcome too.

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The answer is in the income tax act. Using the Table of Contents makes the analysis simpler. Let's take the example of a consumer purchase refund. We can probably safely say that

  • It is not income from Office or employment
  • It is not income from a Business or property
  • It is not related to capital gains or losses

The only source of doubt would probably be "Other income", although it is generally preferable to make sure to understand the signification of a word as defined by the Act.

Your second example of an interest-free loan falls under the heading "Interest free or low interest loans" under "Other income".

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  • "Other income" (or rather the fact that the list of sources is not exhaustive) is precisely what confuses me. I am looking for a way to understand the signification of the word (as you put it) relying on an official document and in a time-efficient manner. I suppose, most professional accountants and tax experts get this understanding from years of formal education and practice. This is not an option for me. – paperskilltrees May 23 '20 at 2:28
  • Speaking of "Interest free or low interest loan" under "Other income", the paragraphs 56(4.1--4.3) describe what to do with the income from the loaned property, not the loaned property itself. In my understanding, it says that if I lend you (my close friend) my apple tree, so that I don't have to pay taxes on apples it produces (by declaring them as tax-free windfall or not at all), or if such intent can be reasonably expected, I must declare the apples as my income and pay taxes on them. If I read it correctly, it does not say whether the apple tree is my income when you return it to me. – paperskilltrees May 23 '20 at 2:38
  • If you use the link to the Act you will find a rather long enumeration of all "other" incomes. The Act has many subtleties which do take time and experience to learn. If you need an accurate answer and don't have time to learn properly, seek a CPA or a tax lawyer. – ApplePie May 23 '20 at 3:02

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