What defines 'taxable income'?

The definition of 'taxable income' refers specifically to the portion of income that is subject to tax after accounting for any deductions, exemptions, and allowances that the taxpayer is entitled to claim. This concept is essential in tax compliance as it determines the exact amount of income that will be subject to taxation under the relevant tax laws.

By factoring in deductions and exemptions, taxable income provides a more accurate reflection of an individual's financial ability to pay tax, as it distinguishes between gross income and the income that is actually liable to taxation. The calculation of taxable income is crucial for determining an individual’s or entity’s tax liability, influencing how much tax they ultimately owe.

While other options might mention aspects of income, they do not capture the critical component that defines taxable income. Total income before any deductions does not consider the adjustments that could lower the tax burden. Simply categorizing all income received, regardless of its taxability or source, does not reflect the necessary calculations for taxation. Lastly, limiting the definition to income generated from foreign sources ignores the comprehensive assessment of all income, regardless of its origin, when determining tax liability. Thus, the correct answer encapsulates the essence of taxable income as a figure that appropriately accounts for all pertinent deductions and exemptions.