Distinguish between a factor payment and a transfer payment.

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A factor payment is a payment made in return for Productive service rendered by the factors of production. For example, wages, rent, interest etc. Whereas a transfer payment is a payment received without rendering any productive service in return. For example, old-age pension, donation, grants etc.

A factor payment is a 'productive payment' whereas a transfer payment is an 'unproductive payment'.
A factor payment is included in National Income whereas a transfer payment is not included in it.

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