How is zakat calculated on money that generates a monthly income that is spent? Is it on the principal amount and the spent returns, or only on the principal amount and what remains of the returns?

You are not required to pay zakat (definition) on profits that you spent before a full year (hawl) passed on their principal. Rather, you calculate the zakat on the funds that have completed a full year in your possession, which include the principal amount and any remaining monthly profits, according to the Prophet's (peace be upon him) saying: "There is no zakat on wealth until a full year passes on it." The hawl of the profit is the hawl of its principal.