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V. Income from Other Sources
Any income which is not chargeable to tax under any other heads of income and which is not to be
excluded from the total income shall be chargeable to tax as residuary income under the head “Income
from Other Sources”.
5.1 Basis of Charge [Sec. 56]:
Income chargeable to tax under the head “Income from other sources” shall include following:
S. Nature of income taxable as residuary income
No.
1. Dividends
2. Income by way of winnings from lotteries, crossword puzzles, races including horse races, card
games, gambling or betting of any form or nature whatsoever
3. Any sum received by an employer from his employees as contribution towards PF/ESI/
Superannuation Fund etc., if same is not deposited in the relevant fund and it is not taxable under
the head ‘Profits and Gains from Business or Profession’.
4. Interest on securities, if not taxable under the head ‘Profits and Gains of Business or Profession’
5. Income from machinery, plant or furniture belonging to taxpayer and let on hire, if income is not
chargeable to tax under the head ‘Profits and Gains of Business or Profession’
6. Composite rental income from letting of plant, machinery or furniture with buildings, where such
letting is inseparable and such income is not taxable under the head ‘Profits and Gains of Business
or Profession’
7. Any sum received under Keyman Insurance Policy (including bonus), if not taxable under the
head ‘Profits and Gains of Business or Profession’ or under the head ‘Salaries’
8. In the following cases, any sum of money or property received by a person from any person
(except from relatives or member of HUF or in given circumstances, see note 1) shall be taxable
under the head ‘Income from other sources’:
a) If any sum is received without consideration in excess of Rs. 50,000 during the previous year,
the whole amount shall be chargeable to tax;
Though the provisions relating to gift applies in case of every person, but it has been reported
that gifts by a resident person to a non-resident are claimed to be non-taxable in India as the
income does not accrue or arise in India. To ensure that such gifts made by residents to a
non-resident person are subjected to tax in India, the Finance (No. 2) Act, 2019 has inserted
a new clause (viii) under Section 9 of the Income-tax Act to provide that any income arising
outside India, being money paid without consideration on or after 05-07-2019, by a person
resident in India to a non-resident or a foreign company shall be deemed to accrue or arise
in India.
However, the Finance Act, 2023 amended section 9(viii) to include the applicability of
provisions of gifts in case of a person being not ordinarily resident in India w.e.f 1st April
2023.
b) If an immovable property is received without consideration and the stamp duty value exceeds
Rs. 50,000, the stamp duty value of such property shall be chargeable to tax;
c) If immovable property is received for consideration which is less than the stamp duty value of
property by higher of following amount the difference is chargeable to tax:
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(i) the amount of Rs. 50,000
(ii) the amount equal to 10% of consideration.
d) If movable properties* is received without consideration and the aggregate fair market value
of such properties exceeds Rs. 50,000, the whole of aggregate fair market value of such
properties shall be chargeable to tax
e) If movable properties is received for consideration which is less than the aggregate fair
market value of properties by an amount exceeding Rs. 50,000, the difference between the
aggregate fair market value and the consideration is chargeable to tax.
Note:
1. Any sum of money received by an individual, from any person, in respect of any expenditure
actually incurred by him on his medical treatment or treatment of any member of his family
in respect of any illness related to COVID-19, shall not be considered as income of such
person. (subject to certain conditions)
2. Any sum of money received by family member of a person who died due to COVID-19, the
money so received shall not be considered as income of the family member where such
money is received from the employer of deceased person. Where the money is received
from any other person or persons, the exemption amount shall be limited to Rs. 10 lakh in
aggregate. (subject to certain conditions
9. If shares in a closely held company are received by a firm or another closely held company from
any person without consideration or for inadequate consideration, the aggregate fair market value
of such shares as reduced by the consideration paid, if any, shall be chargeable to tax.
Note: Nothing would be chargeable to tax if taxable amount doesn’t exceed Rs. 50,000.
10. If a closely held public company receives any consideration for issue of shares which exceed the
fair market value of such shares, the aggregate consideration received for such shares as reduced
by its fair market value shall be chargeable to tax.
Note: This provision is not applicable in the following cases:
a) Where the consideration for issue of shares is received by a venture capital undertaking from
a venture capital company or venture capital fund or a specified fund.
“Specified fund” means a fund established or incorporated in India in the form of a trust or a
company or a LLP or a body corporate which has been granted a certificate of registration
by SEBI as a Category I or Category II Alternative Investment Fund (AIF).
b) Where the consideration for issue of shares is received by company from class or classes of
person as notified by the Government.
In this regard, the Government has provided that section 56(2)(viib) shall not apply where
consideration is received by a start-up company in respect of shares issued to a resident
person. However, a start-up company shall fulfil the condition mentioned in the Notification
No. 127(E), dated 19-02-2019 issued by the Department for Promotion of Industry and
Internal Trade (DPIIT).
With a view to ensure compliance to the conditions specified in the said notification, the Finance
(No. 2) Act, 2019 reiterates that in case of failure to comply with the conditions specified in
the notification, the consideration received from issue of shares as exceeding the fair market
value of such shares, shall be deemed to be income of the company chargeable to tax for the
previous year in which such failure takes place. Further, it shall be deemed that the company
has misreported the said income and, consequently, a penalty of an amount equal to 200% of
tax payable on the underreported income (i.e., difference between issue price and fair
market value of shares) shall be levied as per section 270A.
10A. Any compensation received by a person in connection with the termination of his employment or
modification of terms and conditions relating thereto.
11. Interest received on compensation or enhanced compensation
12. Any sum of money received as an advance or otherwise in the course of negotiations for transfer
of a capital asset shall be charged to tax under this head, if:
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a) Such sum is forfeited; and
b) The negotiations do not result in transfer of such capital asset.
* ‘Movable property’ shall include shares, securities, jewellery, archaeological collection, drawings,
paintings, sculptures, any work of art or bullion etc.
5.1.1 Gifts not chargeable to tax [Sec. 56(2)(x)]
Any sum of money or property received by any person in the following circumstances shall not be
chargeable to tax:
a) Gifts received from relatives**;
b) Gifts received by an individual on occasion of his/her marriage;
c) Gifts received by way of Inheritance/will;;
d) Gifts received in contemplation of death of the payer;
e) Gifts received from any local authority;
f) Gifts received from any fund, foundation, university, educational institution, hospital, medical
institution, any trust or institution referred to in Section 10(23C); [w.e.f. AY 2023-24, this exemption
is not available if a sum of money is received by a specified person referred to in section 13(3)].
g) Gifts received from any trust or institution registered under sections 12A/12AA/12AB [w.e.f. AY
2023-24, this exemption is not available if a sum of money is received by a specified person referred
to in section 13(3)].
h) Share received as a consequences of demerger or amalgamation of a company under clause (vid) or
clause (vii) of section 47, respectively.
i) Share received as a consequences of business reorganization of a co-operative bank under section
47(vicb)
j) From any person, in respect of any expenditure actually incurred by individual on his medical
treatment or treatment of any member of his family, for any illness related to COVID-19 (subject to
such conditions as prescribed by Govt.).
k) By a member of the family*** of a deceased person, if cause of death is illness related to COVID-
19,:
From the employer of the deceased person; or
From any other person or persons to the extent that such sum doesn’t exceed Rs. 10 lakh.
Note: The member must receive the payment within 12 months from the date of death of such person and
satisfy such other conditions which may the Central Government may notify in this behalf
l) from such class of persons and subject to such conditions as may be prescribed
** ‘Relative’ shall mean:
1. Spouse of the individual
2. Brother or sister of the individual
3. Brother or sister of the spouse of the individual
4. Brother or sister of either of the parents of the individual
5. Any lineal ascendant or descendant of the individual
6. Any lineal ascendant or descendant of spouse of the individual
7. Spouse of the person referred in point 2-6 above
*** ‘Family’, in relation to an individual, means:
1. The spouse and children of the individual; and
2. The parents, brothers, and sisters of the individual or any of them, wholly or mainly dependent on the
individual.
5.2 Deductions [Sec. 57]:
The following expenditures are allowed as deductions from income chargeable to tax under the head
‘Income from Other Sources’:
S.N. Section Nature of Income Deductions allowed
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1. 57(i) Dividend or Interest on securities Any reasonable sum paid by way of
commission or remuneration to banker or
any other person for purpose of realizing
dividend or interest on securities
2. 57(ia) Employee’s contribution towards If employees’ contribution is credited to
Provident Fund, Superannuation Fund, ESI their account in relevant fund on or before
Fund or any other fund setup for the the due date
welfare of such employees
3. 57(ii) Rental income letting of plant, machinery, Rent, rates, taxes, repairs, insurance and
furniture or building depreciation etc.
4. 57(iia) Family Pension 1/3rd of family pension subject to
maximum of Rs. 15,000.
5. 57(iii) Any other income Any other expenditure (not being capital
expenditure) expended wholly and
exclusively for earning such income
6. 57 (iv) Interest on compensation or enhanced 50% of such interest (subject to certain
compensation conditions)
7. 58(4) Income from activity of owning and All expenditure relating to such activity.
Proviso maintaining race horses.
5.3 Expenses not deductible [Section 58]:
S.N. Section Nature of Income
1. 58(1)(a)(i) Personal expenses
2. 58(1)(a) Interest chargeable to tax which is payable outside India on which tax has not been
(ii) paid or deducted at source
3. 58(1)(a) ‘Salaries’ payable outside India on which no tax is paid or deducted at source
(iii)
4. 58(1A) Wealth-tax
5. 58(2) Expenditure of the nature specified in section 40A
6. 58(4) Expenditure in connection with winnings from lotteries, crossword puzzles, races,
games, gambling or betting
[As amended by Finance Act, 2023]
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