Introduction :

When the income is not chargeable under any other head of income is chargeable
under this head i.e. "income from other sources".
Income chargeable under this head is computed with the regular method of accounting
adopted by the assessee.
In other words, it can be said that this is a residual head of charge of income.
Under the following conditions, the income will be charged under this head.
i) There is an Income
ii) Such income is not exempt from tax u/s 10 to 13A.
iii) Such income does not included under other 4 heads of income as Discussed
earlier.

Meaning and Concept of Income from Other Sources :

Income from other sources is the fifth and last head of income under which the total is
computed and assessed. As the name suggests, "Income from Other Sources" is
a residuary head of income. Any item of income chargeable to tax but does not fall
within the ambit of the other four specific heads of income shall be included under
this head of income.
Section 56 lays down what incomes are taxable under this head. Section 57 and 58
lays down the deductions which are allowable and not allowable respectively, while
computing income under this head.

The Following Income of Assessee are Chargeable under this Head : [Section
56(2)] :
There are many incomes which are taxable under head 'Income from Other Sources'
However, Section 56(2) enlists certain specific incomes which shall be chargeable to
Income-tax under the head Income from other sources without prejudice to the
generality of the provisions of sub-section (1) of Section 56. These are as follows :
1) Dividends, other than the dividends referred to in Section 115-0.
2) Winnings from lotteries, crossword puzzles races including horse races, card games
and other games of any sort, or from gambling or betting of any form or nature
whatsoever.
3) Any sum received by the assessee from his employees as contribution to any
provident fund, or any other welfare fund for the employees provided it is not taxable
under the head "Profit and Gains of Business or Profession'.
4) Income by way of interest on securities provided the income is not chargeable to
income tax under the head profits and gains of business or profession.
5) Income from machinery, plant or furniture belonging to the assessee and let on hire,
provided the income is not chargeable to income tax under the head profits and gains
of business or profession.
6) Where the assessee lets on hire, the machinery, plant or furniture belonging to him
and also buildings, and letting of-buildings, is inseparable from the letting of the said
machinery, plant or furniture, the income from such letting, if it is not chargeable to
income tax under the head profits and gains of business or profession.
7) Any sum received under a Keyman Insurance Policy, including the sum allocated
by way of bonus on such policy, if such income is not taxable under the head
"Salaries" or "Profits and gains of business or profession".
8) Any sum of money (gift) aggregate value of which exceeds Rs. 50,000 received
without consideration by an individual or a Hindu Undivided Family from any person
or persons, subject to certain exceptions [Section 56(2)](vi)].
9) Income by way of interest received on compensation or on enhanced compensation
to be taxed in the year in which such interest is received.
10) Amount received as advance in case of a capital asset and when Such sum is
forfeited or negotiations do not result in transfer shall be taxable under Section
56(2)(ix).
11) Other Incomes which are Normally Included under the Head Income from Other
Sources :
Following are some of the incomes which are normally chargeable to tax under this
head because these are not covered under any of the specified heads:
i) Income form sub-letting of a house property by a tenant,
ii) Casual income,
iii) Insurance commission,
iv) Family pension (payment received by the legal heirs of a deceased employees),
v) Director's sitting fee for attending board meetings,
vi) Interest on bank deposits/deposits with companies,
vii) Interest on loans,
viii) Income form undisclosed sources,
ix) Remuneration received by Members of Parliament,
x) Interest on securities of foreign government,
xi) Examinership fees received by a teacher from an institution other than his
employer,
xii) Total interest till date on employee's contribution to an unrecognized provident
fund at the time when the payment of lump sum amount form the unrecognized
provident fund is due,
xiii) Rent from a vacant piece of plot of land,
xiv) Agriculture income from agricultural land situated outside India,
xv) Interest received on delayed refund,
xvi) income form royalty, if it is not an income from business or profession,
xvii) Director's commission for standing as a guarantor to bankers,
xviii) Directors commission for underwriting shares of a new company,
xix) Gratuity received by a director who, under the relevant contract, is not an
employee or servant of the company, is assessable as income from other sources,
xx) Income from racing establishment,
xxi) Income from granting of mining rights,
xxii) Income from markets, fisheries, rights of ferry or moorings,
xxiii)Income from grant of grazing rights,
xxiv) Interest paid by the government on excess payment of advance tax, etc.
xxv) Income received after discontinuance of business.

Deductions from Income from Other Source : Section 57 :

The following chart explains the deductions available while computing "Income
from other sources".

Particulars Deductions
Lower of - 1/3rd of such
Family pension income Rs. 15,000/-
Dividends Bank Commission
Gifts in any year
exceeding Rs.50,000/- -
Income from letting of :
Furniture
Machinery
Plant
Current repairs, not borne
Building which is not by tenant
separable from Composite
Insurance Premium
letting with machineries
etc. Depreciation
Bank commission,
Interest on securities remuneration paid
Any sum received under
Key man insurance
Policy (Including bonus) -
Receipt from employees Sum credited to the
being contribution to employee's account of the
Provident Fund, relevant fund on or before
Superannuation Fund etc. due date.

Amounts Not Deductible : Section 58 :

Amounts not deductible in computing the income under the head 'Income from Other
Sources' (Section 58).
The following payments shall not be deductible in computing the income chargeable
under the head 'Income from Other Sources':

1) Personal expenses of the assessee.

2) Interest paid outside India on which tax has not been deducted at source.
3) Salaries paid outside India on which tax is not deducted at source.
4) Any expenditure referred to in section 40A like excessive payments to
relatives [Section 40A(2)] and cash payments exceeding Rs.20,000 / Rs.35,000 made
in a mode other than account payee cheque / draft [Section 40A(3)].
5) Income tax/wealth tax paid.
6) Any expenditure or allowance in connection with winning of lottery, crossword
puzzles, etc. However, expenditure incurred by the assessee for the activity of owning
and maintaining race horses shall be allowed as a deduction while computing the
income from this activity.
7) Wealth Tax

Important Points
Exercises explaining Income tax provision:
Provisions relating to income from other sources: Tax treatment of Dividends:
(a) Dividends declared or distributed by an Indian Company or by a mutual fund on its
units or units of UTI are fully exempted.
(b) Dividends from a foreign company & co-operative society are taxable.
(c) Collection charges on exempted on exempted dividends & interest on loan
borrowed for investment in share (Whose dividends are exempted) are not deductible
Casual Income:
(A) Lottery winnings & winnings from cross word puzzle & card games are subject
to TDS at 30% if the income exceeds Rs. 10,000
(B) Race winnings are subject to TDS @ 30% if the income exceeds Rs. 5,000
(C) No TDS on other race winnings, gambling & bettings.
(D) Casual income is grossed up if net income or income received is given. Grossing
up is not required if gross amount or amount won is given.
(E) Gross amount is = Net amount × 100/ 100 – Tax rate
III. Income from letting on Hire of Machinery, Furniture along with building
Income from leasing out of Plant & Machinery along with Building & Furniture.
Rent received from leasing of Plant & Machinery along with Building
Less: Expenses ***
1. Depreciation of Building ***
Depreciation of plant ***
2. Repairs of Building ***
Repairs of Plant ***
3. Insurance of Building ***
Insurance of Plan ***
4. Office expenses ------- ***
Income from leasing of Plant & Building ***
IV. Interest on Securities:
a) Interest on Gov. Securities is gross income (Grossing up is not required)
b) Interest on non Gov. Securities is of following types.
I. Tax free commercial securities: Income on these securities is always to be grossed
up.
II. Other non Gov. Securities: Grossing up of interest on these securities is required if
net interest or interest received is given.
III. Rate of Tax is 10% on listed securities & on unlisted securities.
IV. Gross amount of interest is equal to = Net Amount × 100 /100- Tax rate.