Income from other sources:
Introduction:
Income from other sources is a residuary head of income. Any item of income chargeable to
tax but does not fall within the earlier four specific heads of income shall be included under this
head of income. Sec 56 of the Income Tax act of 1961 defines the scope of income chargeable under
this head.
Income taxable in general Sec: 56(1)
The following incomes are taxable in general
a. Family pension received
b. Interest on deposit and loans
c. Salary of MP., MLC and MLA
d. Income from subletting
e. Interest on securities
f. Agriculture income from a place outside India
g. Examination fees received by a teacher
h. Rent of plot of land
i. Insurance commission
j. Director’s fees
k. Income from undisclosed sources
l. Income from racing establishment
m. Income derived from ferries, fisheries
n. Etc…….
Income taxable in general Sec: 56(2)
1. Dividend (Note : Dividend from domestic company is exempt from tax)
2. Any winning from lotteries, cross word puzzles, races including horse race, card games, other
games, betting of any form
3. Sum received from employees towards their share of contribution to any staff welfare fund
account
4. Interest on securities if not charged to tax under the head profit and gains from business.
5. Income from letting plant, machinery or furniture with or without building
6. Any sum received under keyman insurance policy including bonus if not taxable as salary or
business income.
7. Gift(i.e any sum of money received without consideration) exceeding Rs 50000 the whole of
such sum
ADIMISSIBLE SPECIFIC DEDUCTIONS (Sec 57)
The income chargeable to tax under this head is computed after making following deductions:-
1. Commission /Remunration : for realizing dividend and interest on securities is allowed only if
such income is taxable.
2. Interest on loan : if a loan is taken exclusively for purchases of securities interest on such loan is
deductible
3. Deduction in respect of contribution of employees : Any contribution received towards any
welfare fund of such employee is allowed if such contribution received from employees credited
to the employees account
4. Other deduction expenses u/s 57(iii) : Any other expenditure is deductible u/s 57(iii) subject to
the fulfillment of following conditions :
(i) The expenditure must be wholly and exclusively incurred for the purpose of earning
income
(ii) The expenditure must not be in the nature of capital expenditure
(iii) The Expenditure must not be in the nature of personal expenses of the assessee
(iv) It must be expanded during the relevant previous year.
EXPENSESES NOT DEDUCTION Sec 58
a. Personal expenses
b. Any interest chargeable to tax which is payable outside India on which tax has not been paid
or deducted at sources
c. Wealth tax
d. Expenses concerned with exempted incomes
Tax deduction at Sources (TDS) The person responsible for payment will deducted the tax at a
specified rate before making any payment. TDS so deducted payment of tax by the assesse. The
amount to TDS deducted is the part of income of the assessee therefore it should be added back to the
net income by Grossing up
Income received by Individual and HUF TDS is deductible if payment is in excess of Rate of TDS
Payment of Interest on Securities - 10.00%
If Payment of Interest from a banking Rs 10000/- per month 10.00%
company
If payment of Interest from other than a Rs 5000/- per month 10.00%
banking company
Winning from lotteries or Cross Word Rs 10000 (w.e.f AY 2011-12) 30.00%
Puzzle or Card Game or any other Game
Winning from House Race Rs 5000/- per annum (w.e.f A.Y 2011-12) 30.00%
Grossing up: It means the ascertainment of gross income on the basis of net income received when
TDS. Is made. The need for grossing up arises because TDS is made by the person responsible for making
payment of income
Calculate Gross Income :
Gross Income = Net Income*100 / tax rate without %
Gross Income =(Net Income)+ deducted income
Meaning of Government securities
These are also the securities issued by the State or Central Government the interest from
which is taxable. But this interest is not liable for Deduction of tax at source. Therefore, the entire
interest amount is included in the income from other sources. Hence the question of “ Grossing up”
of the interest does not arise
Meaning of Tax free government securities
These are the securities issued by the State or Central Government the interest from which is
fully exempt from tax. Hence the question of deduction of tax at source from interest does not arise
Meaning of taxable securities:
These are the securities issued by a company issued by a company or other commercial
bodies. In this case “Tax free” means the interest on these securities is paid to the assessee as per
the agreed rate of interest and the tax payable thereon is directly paid by the company to the
Government on our behalf
Meaning of Less Commercial Securities:
These are the securities issued by a company or other commercial bodies. In this case “Less-tax”
means the interest is calculated at the agreed rate and then if the interest exceeds the specified
amount. The tax will be deducted thereon and remitted to the Government.
