INCOME FROM OTHER SOURCES

Basis of charge (section 56)

This is the residual head of charge of income where a source of income does not specifically
fall under any one of the other heads of income such as salary, house property, profits and gains
of business or profession and capital gains, such income is to be charge under section 56
‘income from other source’.
Under the income tax act, income of every kind which is not to be exclude from the total income
shall be chargeable under head income from other sources, if it is not chargeable to income to
tax under any of the other head of income.
Chargeable Income [section 56(2)]
1. Dividend Sec. 10(34) – which provides an exemption to the shareholders in respect of
dividend income, is withdrawn from assessment year 2020-21. Thus, dividend
received during the financial year 2021-22 and onwards shall now be fully taxable in
the hands of the shareholders or unit holder. But deduction for expenses u/s 57 shall no
be allowed except interest subject to 20% of such income w.e.f. 01-042021. The
domestic company shall not be liable to pay additional income tax on the amount
declared by way of dividend. If dividend is received for non-domestic company, it is
also fully taxable.
2. Any winning from lotteries, crossword puzzles, races including horse races, card game
and other game of any sort or from gambling or betting of any form or nature
whatsoever (sec 56[2](ib)]. 30% flat tax plus 4% cess.
3. Any sum received by assessee from his employees as contribution to any provident
fund or superannuation fund or any fund set up under the provision employees
state insurance act 1948 or any other fund for the welfare of the emloyees, if such
income is not chargeable under the head “Profit and gains fo business and profession”
{Sec 56(2)(ii)}
4. Income by way of interest on securities, if it is not chargeable as profit and gains of
business i.e. where securities are held as investment {sec. 56(2)}
5. Income from machinery, plant or furniture belonging to the assessee let on hire, if
the income is not chargeable to income tax under the head “profit and gains of business
or profession”. {Sec 56(2)(ii)}
6. Where an assessee let on hire machinery, plant and furniture belonging to him and
also building, and the letting of the building is inseparable from the letting of the
machinery, plant or furniture the income from such letting, if it is not chargeable to
income tax under the head “profit and gains of business or profession” {sec 56 (2(iii)}
7. Any sum received under “Keyman insurance policy” including bonus, if not charged
under the head “profit and gains from business and profession” {Sec 56(2))(iv)}
8. Gifts {Sec 56 (2)(iii)}. The amount received as a fift exceeding Rs. 50,000 in the form
of movable or immovable property. (However, the exemption is provided on gifts
received from relatives, gifts received at the time of marriage, under will or inheritance
etc.)
 9. Amount received under Life Insurance Policy (u/s 56(2)). Income received from
insurance policies issued on or after April 1, 2023 (other than unit-linked policies).
Having a premium or aggregate premium exceeding Rs. 5 lakh in a year, will be taxable
(except in the case of the death of the insured)
Apart from the above the following incomes are also chargeable under the head income
from other sources.
1. Income from subletting.
2. Interest on bank deposits and loans and securities
3. Agricultural income from a place outside India
4. Rent of plot of land
5. Mining rent and royalty
6. Casual income under a will, contract trust deed
7. Salary payable to a member of parliament.
8. Income from undisclosed source
9. Gratuity paid to a director who is not employee of a company
10. Any casual income exceeding Rs. 5000.
11. Income from market, ferries and fisheries etc.
12. Income from lease hold property
13. Remuneration received for writing articles in journals
14. Salary of MP, MLA, member of legislative assembly or council
15. Interest received on securities of cooperative society
16. Family pension received by the window and heirs of deceased employees.
17. Amount withdrawn from deposit in national saving scheme 1987 on which deduction
(u/s 80CCA) has been allowed including interest thereon.
18. Directors commission for giving guarantee to bank.
19. Directors’ commissions for underwriting shares of a new company
20. Insurance commission not chargeable under the head business or profession.
21. Gratuity received by a director who is not an employee of the company.
22. Tips received by a waiter or taxi driver not being given by his employer
Tax treatment of other source of income
A. Fully taxable Other Sources:
1. Dividend receive from SBI Or any Indian domestic company.
(Fully taxable w.e.f. A.Y. 2021-22)
2. Income from U.T.I. (Fully taxable w.e.f A.Y. 2021-22)
3. Income of Mutual Fund (Fully taxable w.e.f. 2021-22)
4. Interest on Security of Central OR State Government
5. Interest on National Saving Certificate (N.S.C)
6. Interest on debentures, Bond issued by Statutory Corporation/Co-operative Society,
Public Sector Company.
7. Income from subletting
8. Agricultural Income if received from outside India
9. Interest on Deposited under National Scheme.
10. Dividend received from foreign company/credit co-operative society
11. Interest on Deposit Reliance / Any Company
 12. Royalty form Books Examiner Ship Remuneration
13. Interest on Bank Deposit/Foreign Bank
14. Winning from Crossword Puzzles
15. Interest on own contribution Unrecognized Provident Fund Account
16. Income of local authority – not taxable u/s 10(20) Under Income from other sources
17. Royalty from Pakistan government for use of its patents
18. Royalty from an Indian Company on trading of Technical know-how.
19. Gift from friend
20. Amount withdrawn from NSS 87
21. Examination remuneration from university
22. Royalty from books of artistic nature
23. Income from card games
24. Examiners fees
B. Partly Exempted
1. Family Pension u/s 57(iia)
1/3rd (33.33%) of Family Pension Amount or Rs. 25,000 w.e.f. A.Y 2025-26
whichever is lower is exempt from tax
Note: This Exemption is also applicable inc case of option of new taxation regime
u/s 115 BAC} exercised
2. Clubbing income of a minor child Rs. 1500 u/s 10(32)
Note: this exemption is not applicable/fully taxable in case of opting New Tax
Regime u/s 115 BAC w.e.f. A.Y. 2021-22
3. Interest on Deposited under Post-Office OR Time Deposit Exemption upto Rs.
3500 & Rs. 7000 for joint account [The current interest rates for Post Office savings
deposits are 3.5% per annum. The minimum investment limit in this scheme is Rs.
50 and maximum limit is Rs. 1 lakh for an individual account and 2 lakh in case of
a joint account