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Chapter 7 – Income from Other Sources

Income Chargeable Under the Head “Income from Other Sources”
[Section 56]: Some examples

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Section Income
56(2)(i) Dividend Income
56(2)(ib) Casual Income (winnings from lotteries, crossword puzzles, races including horse races,
card games and other games, gambling, betting etc.)
56(2)(viii) Interest received on compensation/enhanced compensation deemed to be income in
the year of receipt
56(2)(ix) Advance forfeited due to failure of negotiations for transfer of a capital asset
56(2)(x) Sum of money or property received by any person
56(2)(xi) Compensation or any other payment received in connection with termination of his

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employment
56(2)(xii) Sum received, including the amount allocated by way of bonus, under an LIP other than
under a ULIP and keyman insurance policy, which is not exempt under section 10(10D)

Dividend Income [Section 56(2)(i)]

Dividend income is taxable under the head “Income from Other Sources”.
Deemed According to section 2(22), the following receipts are deemed to be dividend:
Dividend
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2(22)(a) Distribution of accumulated profits, entailing the release of company’s
assets
2(22)(b) Distribution of debentures, deposit certificates to shareholders and
bonus shares to preference shareholders
2(22)(c) Distribution on liquidation
2(22)(d) Distribution on reduction of capital
2(22)(e) Advance or loan by a closely held company to its shareholder
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2(22)(f) Buyback of Shares:

• From 01-10-2024, any money received by the shareholder on
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buyback of shares shall be taxed in the hands of the

shareholders as dividend, and not in the hands of the company
at the applicable normal tax rates.

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• Since, on buy-back, the shares shall be "extinguished", it will
also amount to transfer of those shares, for the purpose of
which the consideration would be treated as Nil.
• The resultant loss would be a capital loss, which could be either
short term or long term, depending upon the period of holding.
• No deduction is allowed against this deemed dividend income.

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Taxability
Rate It is taxed at Normal Rates of Tax
Deductions If any loan is taken for investment in shares to earn dividends, interest
Allowed paid on such loan is allowed as deduction upto 20% of Grossed Up Value.
TDS Implications
By TDS is NOT required to be deducted by the company at the time of
Companies payment of dividend if:
on Dividend • Payment is made to an individual shareholder;
• Dividend is paid by the company in any mode other than cash;

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and
• Aggregate dividend paid/payable by the company to the
shareholder in the financial year ≤ ₹ 5,000.
By Mutual The mutual fund is liable to deduct tax at source if the aggregate income
Funds payable by the person responsible for paying to the unit holder >
₹ 5,000.

Taxation of Certain Incomes

Income Winnings from lotteries, Unexplained cash Net winnings from
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crossword puzzles, races credits/ investments/ online games
including horse races, card money, bullion, jewellery
games and other games, etc./ expenditure, etc.
gambling, betting etc. (other
than winning from any online
game)
Section 115BB 115BBE 115BBJ
Tax Rate 30% of such winnings (further 60% of such income plus 30% of net winnings
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increased by surcharge, if surcharge @25% of tax from online game

applicable, and health and (Effective rate of tax is (further increased by
education cess @ 4%) 78%, including health and surcharge, if applicable,
education cess @ 4%) and health and
education cess @ 4%)
Other ➢ No expenditure or allowance can be allowed from such income.
Conditions ➢ Deduction under Chapter VI-A is not allowable from such income.
➢ Adjustment of unexhausted basic exemption limit is also not permitted
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against such income.

➢ Set-off of losses is not permissible against such income.
TDS 30%, if aggregate amount > 30%, without any
₹10,000 (u/s 194BB) threshold (u/s 194BA)
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Interest Received on Compensation/Enhanced Compensation [Section
56(2)(viii)]
• This is deemed to be the income of the year of receipt.
• It is taxable under the head Income from Other Sources.
• A flat deduction of 50% is allowed u/s 57.

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Advance Forfeited Due to Failure of Negotiations for Transfer of a
Capital Asset [Section 56(2)(ix)]
Any advance money received and forfeited by any person due to the failure of negotiations for transfer
of a capital asset on or after 01-04-2014 is taxed under the head Income from Other Sources in the
year of receipt.

Sum of Money or Property Received by Any Person [Section 56(2)(x)]

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Nature of Asset Taxable Value
1 Money The whole amount if the same exceeds ₹50,000.
2 Moveable Property • Without consideration: The aggregate fair market value of the
property, if it exceeds ₹50,000.
• Inadequate consideration: The difference between the aggregate
fair market value and the consideration, if such difference exceeds
₹50,000.
Note: Property means Shares, Securities, Jewelry, Drawings, Paintings,
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Sculpture, Archaeological Collections, Any other work of art, Bullion
[SSJDPSAOB]
3 Immovable • Without consideration: The stamp value of the property, if it
Property exceeds ₹50,000.
• Inadequate consideration: The difference between the stamp
duty value and the consideration, if:
o SDV – Consideration > ₹50,000 AND
o SDV > 110% of Consideration
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Cost of Acquisition for the Receiver of Gift

Particulars Cost of Acquisition Date of Acquisition
Tax Paid Under IFOS SDV Date of Receiving the Gift
Tax Not Paid Under IFOS Cost to Previous Owner Date of Acquisition of the Previous Owner
However, any sum of money or value of property received in the following circumstances would
be outside the ambit of section 56(2)(x):
➢ from any relative; or
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➢ on the occasion of the marriage of the individual; or

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➢ under a will or by way of inheritance; or
➢ in contemplation of death of the payer or donor, as the case may be; or
➢ from any local authority as defined in the Explanation to section 10(20); or
➢ from any fund or foundation or university or other educational institution or hospital or
other medical institution or any trust or institution referred to in section 10(23C); or
➢ from or by any trust or institution registered under section 12A or section 12AA or section
12AB; or
However, where sum of money or property has been received by specified persons under
section 13(3), this relaxation is not available and section 56(2)(x) would be applicable.
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➢ by any fund or trust or institution or any university or other educational institution or any
hospital or other medical institution referred to in Section 10(23C)(iv)/(v)/ (vi)/(via); or
➢ by way of transaction not regarded as transfer under specified clauses of section 47; or
➢ from an individual by a trust created or established solely for the benefit of relative of the
individual; or
➢ 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, for any illness related
to COVID-19 subject to conditions notified by the Central Government; or
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➢ by a member of the family of a deceased person from the employer of the deceased
person (without any limit); or from any other person or persons to the extent that such
sum or aggregate of such sums ≤ ₹10 lakhs, where the cause of death of such person is
illness related to COVID-19 and the payment is received within 12 months from the date
of death of such person; and subject to such other conditions notified by the Central
Government; or
➢ from such class of persons and subject to such conditions, as may be prescribed.
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Sum Received, Including the Amount Allocated by Way of Bonus, Under
a Life Insurance Policy (LIP) Other Than Under a ULIP And Keyman
Insurance Policy, Which is Not Exempt u/s 10(10D)

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Guidelines u/s 10(10D) of the Income-tax Act, 1961 [Circular No.

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15/2023 dated 16.08.2023] Click Here for Detailed Explanation

Scan this QR Code, if the notes are printed:
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Section 10(10D) provides for exemption of the sum received under a life insurance policy, including
the sum allocated by way of bonus on such policy subject to the condition that the annual premium
does not exceed 10% of actual capital sum assured.

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W.e.f. A.Y. 2024-25, section 10(10D) amended by the Finance Act, 2023 to provide that:

1. In case where an assessee has a single life insurance policy (other than ULIP) issued on or after
1.4.2023: Exemption u/s 10(10D) would not be available with respect to any life insurance
policy (other than ULIP) issued on or after 1.4.2023, if the amount of premium payable exceeds
₹ 5,00,000 for any of the previous years during the term of such life insurance policy.
2. In case where an assessee has multiple life insurance policies (other than ULIPs) issued on or

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after 1.4.2023: In a case where premium is payable by a person for more than one life
insurance policies (other than ULIPs) issued on or after 1.4.2023 and the aggregate of premium
payable on such life insurance policies exceed ₹ 5,00,000 for any of the previous years during
the term of any such LIP(s), exemption u/s 10(10D) would be available in respect of any of
those LIPs, at the option of the assessee, whose aggregate premium payable does not exceed
₹ 5,00,000 for any of the previous years during their term. However, to get exemption u/s
10(10D), the condition of annual premium not exceeding 10% of the actual capital sum assured
also needs to be satisfied.

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3. Exemption in case of death of a person: In case any sum is received on the death of a person,
exemption u/s 10(10D) would be available irrespective of the annual premium payable of the
LIP.

Guidelines issued by the CBDT: In case any difficulty arises in giving effect to the provisions of this
clause, the CBDT may issue guidelines for the purpose of removing the difficulty with the previous
approval of the Central Government.

Accordingly, the CBDT has, with the approval of the Central Government, vide this circular, issued the
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following guidelines in respect of LIPs (other than ULIPs):

Situation 1: No sum of any nature including bonus (such sum hereinafter referred as “consideration”)
is received by the assessee on any LIPs which are issued on or after 1.4.2023 (such LIPs hereinafter
referred as “eligible LIPs”) during any previous year preceding the current previous year (being the P.Y.
in which consideration is received and its taxability is being examined) or consideration has been
received on such eligible LIPs in an earlier previous year but has not been claimed exempt. In such a
situation, the exemption u/s 10(10D) would be determined as under:
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1. Where the assessee has received consideration, during the current P.Y., under one eligible
LIP only:
Circumstance Eligibility for Exemption u/s
10(10D)
If the amount of premium payable on such eligible LIP does Such consideration would
not exceed ₹ 5,00,000 for any of the PYs during the term of be eligible for exemption
such eligible LIP and annual premium does not exceed 10% u/s 10(10D).
of actual capital sum assured [Refer Example 1 and 2
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given below]
If the amount of premium payable on such eligible LIP > Such consideration would
₹ 5,00,000 for any of the PYs during the term of such eligible not be eligible for
LIP exemption u/s 10(10D).
[Refer Example 3 given
below]
Example 1:
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LIP A
Date of Issue 01-04-2013
Annual Premium ₹ 6,00,000

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Sum Assured ₹ 60,00,000
Consideration received as on 01.11.2023 on maturity ₹ 70,00,000
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y. 2023-24.
Eligibility for exemption u/s 10(10D): The consideration received under LIP “A” would be
exempt u/s 10(10D) in A.Y. 2024-25 since annual premium does not exceed 10% of the actual

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capital sum assured. Moreover, as the policy has been issued before 1.4.2023, limit of
₹ 5,00,000 of amount of premium payable is not applicable, since it is not an eligible ULIP.
Example 2:
LIP A
Date of Issue 01-04-2023
Annual Premium ₹ 5,00,000
Sum Assured ₹ 50,00,000
Consideration received as on 01.11.2033 on maturity ₹ 52,00,000
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier

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P.Y. preceding the P.Y. 2033-34.
Eligibility for exemption u/s 10(10D): The consideration received would be exempt u/s
10(10D) in A.Y. 2034-35, since the annual premium payable on the policy does not exceed
₹ 5,00,000 and also does not exceed 10% of actual capital sum assured.
Example 3:
LIP A
Date of Issue 01-04-2023
Annual Premium ₹ 6,00,000
Sum Assured ₹ 60,00,000
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Consideration received as on 01.11.2033 on maturity ₹ 70,00,000
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y. 2033-34.
Eligibility for exemption u/s 10(10D): The consideration received would not be exempt u/s
10(10D) in A.Y. 2034-35 since the annual premium payable on the eligible LIP exceeds
₹ 5,00,000.
2. Where the assessee has received consideration, during the current P.Y., under more than
one eligible LIP:
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Circumstance Eligibility for Exemption u/s 10(10D)

If the aggregate of the amount of Such consideration would be eligible for
premium payable on such eligible LIPs exemption under u/s 10(10D).
does not exceed ₹ 5,00,000 for any of [Refer Example 4 given below]
the PYs during the term of such eligible
LIPs and the annual premium ≤ 10% of
actual capital sum assured
If the aggregate of the amount of Consideration in respect of any of those eligible
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premium payable on such eligible LIPs > LIPs whose aggregate amount of premium
₹ 5,00,000 for any of the PYs during the payable does not exceed ₹ 5,00,000 for any of
term of such eligible LIP the PYs during their term would be eligible for
exemption u/s 10(10D), provided their annual
premium ≤ 10% of actual capital sum assured.
[Refer Examples 5, 6 and 7 given below]
Example 4:
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LIP A B
Date of Issue 01-04-2023 01-04-2023
Annual Premium ₹ 3,00,000 ₹ 2,00,000

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Sum Assured ₹ 30,00,000 ₹ 20,00,000
Consideration received as on 01.11.2033 on maturity ₹ 32,00,000 ₹ 21,00,000
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y. 2033-34.
Eligibility for exemption u/s 10(10D): In this case, the aggregate of the annual premium
payable for LIP “A” and LIP “B” does not exceed ₹ 5,00,000 during the term of these policies.

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Further, annual premium payable in respect of LIP “A” and LIP “B” does not exceed 10% of
actual capital sum assured. Therefore, the consideration received under LIP “A” and “B” would
be exempt u/s 10(10D) in A.Y. 2034-35.
Example 5:
LIP A B
Date of Issue 01-04-2023 01-04-2023
Annual Premium ₹ 4,50,000 ₹ 5,50,000
Sum Assured ₹ 45,00,000 ₹ 55,00,000
Consideration received as on 01.11.2033 on maturity ₹ 52,00,000 ₹ 60,00,000

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Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y.2033-34.
Eligibility for exemption u/s 10(10D): In this case, the aggregate of the annual premium
payable for LIP “A” and LIP “B” exceeds ₹ 5,00,000 during the term of these policies.
However, the consideration received under LIP “A” would be exempt u/s 10(10D) in A.Y. 2034-
35, since its annual premium payable does not exceed ₹ 5,00,000 for any previous year during
the term of the policy and also does not exceed 10% of actual capital sum assured.
Consequently, the consideration received under LIP “B” alone would not be exempt u/s
10(10D) in A.Y. 2034-35.
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Example 6:
LIP A B C
Date of Issue 01-04-2023 01-04-2023 01-04-2023
Annual Premium ₹ 1,00,000 ₹ 3,50,000 ₹ 6,00,000
Sum Assured ₹ 10,00,000 ₹ 35,00,000 ₹ 60,00,000
Consideration received as on 01.11.2033 ₹ 12,00,000 ₹ 40,00,000 ₹ 70,00,000
on maturity
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
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P.Y. preceding the P.Y. 2033-34.

Eligibility for exemption u/s 10(10D): The aggregate of annual premium payable for LIP “A”,
LIP “B” and LIP “C” exceeds ₹ 5,00,000 during the term of these policies.
However, the consideration received under LIPs “A” and “B” would be exempt u/s 10(10D) in
A.Y. 2034-35, since aggregate of annual premium payable for these two policies does not
exceed ₹ 5,00,000 for any previous year during the term of these two policies and annual
premium payable in respect of these policies does not exceed 10% of actual capital sum
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assured.
Consequently, the consideration received under LIP “C” alone would not be exempt u/s
10(10D) in A.Y. 2034-35.
Example 7:
LIP X A B C
Date of Issue 01-04-2022 01-04-2023 01-04-2023 01-04-2023
Annual Premium ₹ 5,50,000 ₹ 1,00,000 ₹ 3,50,000 ₹ 6,00,000
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Sum Assured ₹ 55,00,000 ₹ 10,00,000 ₹ 35,00,000 ₹ 60,00,000

Consideration received as on ₹ 62,00,000
01.11.2032 on Maturity

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Consideration received as on ₹ 12,00,000 ₹ 40,00,000 ₹ 70,00,000
01.11.2033 on maturity
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y.2033-34, except LIP X in P.Y. 2032-33.
Eligibility for exemption u/s 10(10D): The consideration received under LIP “X” would be
exempt u/s 10(10D) in A.Y. 2032-33, since annual premium does not exceed 10% of the actual

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capital sum assured. Moreover, as the policy has been issued before 1.4.2023, limit of
₹ 5,00,000 on amount of premium payable is not applicable, since LIP “X” is not an eligible LIP.
The aggregate of annual premium payable for LIP “A”, LIP “B” and LIP “C” (being LIPs issued on
or after 1.4.2023) exceeds ₹ 5,00,000 during the term of these policies.
However, the consideration received under LIPs “A” and “B” would be exempt u/s 10(10D) in
A.Y. 2034-35, since aggregate of annual premium payable for these two policies does not
exceed ₹ 5,00,000 for any previous year during the term of these two policies and annual
premium payable in respect of these policies does not exceed 10% of actual capital sum
assured.

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Consequently, the consideration received under LIP “C” alone would not be exempt u/s
10(10D) in A.Y. 2034-35.

Situation 2: Consideration has been received by the assessee under any one or more eligible LIPs (i.e.,
issued on or after 1.4.2023) during any P.Y. preceding the current P.Y. and it has been claimed to be
exempt u/s 10(10D). Such eligible LIPs are referred as “Earlier Exempt Eligible LIPs (EEE LIPs)” in this
paragraph and corresponding examples and reference to eligible LIPs shall not include EEE LIPs. The
exemption u/s 10(10D) would be determined as under:
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1. Where the assessee has received consideration, during the current P.Y., under one eligible
LIP only:
Circumstance Eligibility for exemption u/s
10(10D)
If aggregate amount of premium payable on such eligible LIP Consideration under such
and EEE LIPs does not exceed ₹ 5,00,000 for any of the PYs eligible LIP would be eligible
during the term of such eligible LIP and annual premium in for exemption u/s 10(10D).
respect of eligible LIP does not exceed 10% of actual capital
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sum assured.
If aggregate amount of premium payable on such eligible LIP Consideration under such
and EEE LIPs > ₹ 5,00,000 for any of the PYs during the term eligible LIP would not be
of such eligible LIP eligible for exemption u/s
10(10D).
2. Where the assessee has received consideration, during the current P.Y., under more than
one eligible LIP:
Circumstance Eligibility for exemption u/s 10(10D)
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If aggregate of the amount of Consideration received would be eligible for

premium payable on such eligible exemption under u/s 10(10D).
LIPs and EEE LIPs does not exceed
₹ 5,00,000 for any of the PYs during
the term of such eligible LIPs and
annual premium in respect of
eligible LIPs also does not exceed
10% of actual capital sum assured.
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If aggregate of the amount of Consideration in respect of any of those eligible LIPs

premium payable on such eligible (whose aggregate amount of premium along with the

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LIPs and EEE LIPs > ₹ 5,00,000 for aggregate amount of premium of EEE LIPs does not
any of the PYs during the term of exceed ₹ 5,00,000 for any of the PYs during their
such eligible LIPs term) would be eligible for exemption u/s 10(10D).
[Refer Examples 8, 9 and 10 given below]
Example 8:
LIP X A B C

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Date of Issue 01-04-2023 01-04-2024 01-04-2024 01-04-2024
Annual Premium ₹ 4,50,000 ₹ 1,00,000 ₹ 1,50,000 ₹ 6,00,000
Sum Assured ₹ 45,00,000 ₹ 10,00,000 ₹ 15,00,000 ₹ 60,00,000
Consideration received as on ₹ 50,00,000
01.11.2033 on Maturity
Consideration received as on ₹ 12,00,000 ₹ 18,00,000 ₹ 70,00,000
01.11.2034 on maturity
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y. 2034-35, except LIP X in P.Y. 2033-34.

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Eligibility for exemption u/s 10(10D): The consideration under LIP “X” would be exempt u/s
10(10D) in P.Y. 2033-34, since the annual premium does not exceed ₹ 5,00,000 and also does
not exceed 10% of actual capital sum assured.
In this case, the aggregate of the annual premium payable for LIP “A”, LIP “B” and LIP “C” along
with the premium for LIP “X” exceeds ₹ 5,00,000 during the term of these policies.
The aggregate of the annual premium payable for LIP “A” and the premium for LIP “X” also
exceeds ₹ 5,00,000 during the term of these policies.
Consequently, the consideration received under LIP “A”, LIP “B” and LIP “C” would not be
exempt u/s 10(10D) in A.Y. 2035-36.
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Example 9:
LIP X A B C
Date of Issue 01-04-2023 01-04-2024 01-04-2024 01-04-2024
Annual Premium ₹ 2,50,000 ₹ 2,00,000 ₹ 2,50,000 ₹ 6,00,000
Sum Assured ₹ 25,00,000 ₹ 20,00,000 ₹ 25,00,000 ₹ 60,00,000
Consideration received as on ₹ 30,00,000
01.11.2033 on Maturity
Consideration received as on ₹ 24,00,000 ₹ 38,00,000 ₹ 70,00,000
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01.11.2034 on maturity
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y. 2034-35, except LIP X in P.Y. 2033-34.
Eligibility for exemption u/s 10(10D): The consideration under LIP “X” would be exempt u/s
10(10D) in P.Y. 2033-34, since the annual premium does not exceed ₹ 5,00,000 and also does
not exceed 10% of actual capital sum assured.
In this case, the aggregate of the annual premium payable for LIP “A”, LIP “B” and LIP “C” along
with the premium for LIP “X” exceeds ₹ 5,00,000 during the term of these policies.
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However, the consideration received under LIPs “A” or “B” (any one) can be claimed as exempt
u/s 10(10D) in A.Y. 2035-36.
If the consideration received under LIP “A” is claimed to be exempt as aggregate of the annual
premium payable for LIP “X” and “A” did not exceed ₹ 5,00,000 for any of the PYs., the
consideration received under LIP “B” would not be exempt.
If the consideration received under LIP “B” is claimed to be exempt as aggregate of the annual
premium payable for LIP “X” and “B” did not exceed ₹ 5,00,000 for any of the PYs., the
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consideration received under LIP “A” would not be exempt. Exemption for consideration
received under LIP “B” is preferred as it is more beneficial to the assessee.

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Alternative treatment: If the consideration under LIP “X” was not claimed to be exempt u/s
10(10D) in A.Y. 2034-35 by the assessee, then, the consideration received under LIP “A” and
LIP “B” would be exempt u/s 10(10D) in A.Y. 2035-36 since the aggregate of the annual
premium payable for the LIPs “A” and “B” together did not exceed ₹ 5,00,000 for any of the
previous years during the term of these two policies. However, the most beneficial treatment
is to claim LIP “X” and “B” as exempt.

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It may be noted that in every case, the consideration received for LIP “C” would not be exempt
u/s 10(10D).
Example 10:
LIP X Y A B C
Date of Issue 01-04-2023 01-04-2023 01-04-2024 01-04-2024 01-04-2024
Annual Premium ₹ 2,00,000 ₹ 2,00,000 ₹ 2,00,000 ₹ 3,00,000 ₹ 6,00,000
Sum Assured ₹ 20,00,000 ₹ 20,00,000 ₹ 20,00,000 ₹ 30,00,000 ₹ 60,00,000
Consideration ₹ 12,00,000
received on

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surrender as on
1.7.2033
Consideration ₹ 24,00,000
received as on
01.11.2034 on
maturity
Consideration ₹ 24,00,000 ₹ 36,00,000 ₹ 70,00,000
received as on
01.11.2035 on
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maturity
Note – The assessee did not receive any consideration under any other eligible LIPs in earlier
P.Y. preceding the P.Y.2035-36, except LIP “X” and “Y”.
Eligibility for exemption u/s 10(10D): The consideration under LIP “X” would be exempt u/s
10(10D) in A.Y.2034-35, since the annual premium does not exceed ₹ 5,00,000 and also does
not exceed 10% of actual capital sum assured.
The consideration received under LIP “Y” would be exempt u/s 10(10D) in A.Y. 2035-36, since
the aggregate of annual premium payable for LIP “X” and “Y” does not exceed ₹ 5,00,000 and
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annual premium payable for LIP “Y” does not exceed 10% of actual capital sum assured.
The consideration received under LIPs “A”, ULIP “B” and ULIP “C” would not be exempt u/s
10(10D) in A.Y. 2036-37, since aggregate of annual premium payable for these three policies
and LIP “X” and “Y” exceeds ₹ 5,00,000.
Alternative treatment: If the consideration on surrender under LIP “X” was not claimed to be
exempt u/s 10(10D) in A.Y. 2034-35 by the assessee, then the consideration received under
LIP “Y” would be exempt and the consideration received under LIP “A” or LIP “B” (any one) can
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be exempt u/s 10(10D) in A.Y. 2036-37.

If the consideration received under LIP “A” is claimed to be exempt, as aggregate of the annual
premium payable for LIP “Y” and “A” did not exceed ₹ 5,00,000 for any of the PYs., the
consideration received under LIP “B” would not be exempt. If the consideration received under
LIP “B” is claimed to be exempt as aggregate of the annual premium payable for LIP “Y” and
“B” did not exceed ₹ 5,00,000 for any of the PYs., the consideration received under LIP “A”
would not be exempt. Exemption for consideration received under LIP “B” is preferred as it is
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more beneficial to the assessee.

If the consideration on surrender of LIP “X” and on maturity of LIP “Y” were not claimed to be
exempt under section 10(10D) in A.Y.2034-35 and A.Y.2035-36, respectively, then

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consideration received under both LIP “A” and LIP “B” would be exempt in A.Y.2036-37 (being
LIPs issued on or after 1.4.2023, whose aggregate consideration does not exceed ₹ 5,00,000).
It may be noted that, in every case, consideration received under LIP “C” would not be exempt
under section 10(10D).

Clarification on GST Component: It is also clarified by the CBDT that the premium payable/aggregate
premium payable for a life insurance policy/policies, other than a ULIP, issued on or after 1.4.2023, for

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any previous year, would be exclusive of the amount of GST payable on such premium.

Clarification on premium of Term life insurance policy: It is further clarified by the CBDT that the limit
of ₹ 5,00,000 of amount of premium payable would not be applicable in case of a term life insurance
policy i.e. where sum under a life insurance policy is only paid to the nominee in case of the death of
the person insured during the term of the policy and no amount is paid to anyone if the insured person
survives the policy tenure.

Hence, any sum received under a term insurance policy shall continue to be exempt under section

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10(10D), irrespective of the amount of the premium payable in respect of such policy. Further the
premium paid f or such policies would not be counted for checking the limit of ₹ 5,00,000 of amount
of premium payable.

Deductions Allowable [Section 57]

S. Particulars Deduction
No.
1. In case of dividend or income in Interest expenditure to earn such income. However,
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respect of units of mutual fund or such interest expenses cannot exceed 20% of such
income in respect of units from a income included in total income, without deduction
specified company under this section.
2. In case of interest on Securities Any reasonable sum paid by way of commission or
remuneration to a banker or any other person.
3. Income consists of recovery from Amount of contribution remitted before the due
employees as contribution to any PF, date under the respective Acts, in accordance with
superannuation fund etc. the provisions of section 36(1)(va)
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4. Income from letting on hire of Current repairs to the machinery, plant, furniture or
machinery, plant and furniture, with or building, insurance premium, depreciation/
without building unabsorbed depreciation
5. Family Pension Old Scheme New Scheme
Sum equal to Sum equal to
• 33 1/3% of • 33 1/3% of
such income or such income or
• ₹15,000, • ₹25,000,
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whichever is less. whichever is less.

6. Interest on compensation/ enhanced 50% of such interest income
compensation received

Deductions Not Allowable [Section 58]

S. Particulars
No.
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1. Any personal expense of the assessee

2. Any interest chargeable to tax under the Act which is payable outside India on which tax has
not been paid or deducted at source.

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3. Any payment chargeable to tax under the head “Salaries”, if it is payable outside India unless
tax has been paid thereon or deducted at source.
4. Any expenditure in respect of which a payment is made to a related person, to the extent the
same is considered excessive or unreasonable by the Assessing Officer, having regard to the
FMV.
5. Any expenditure in respect of which a payment or aggregate payments exceeding ₹10,000 is

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made to a person in a day otherwise than by account payee cheque or draft or ECS through
bank account or through such other prescribed electronic mode such as credit card, debit
card, net banking, IMPS, UPI, RTGS, NEFT, and BHIM Aadhar Pay.
6. Any expenditure or allowance in connection with income by way of earnings from lotteries,
cross word puzzles, races including horse races, card games and other games of any sort or
from gambling or betting of any form or nature.
7. 30% of expenditure in respect of sum which is payable to a resident on which tax is deductible
at source, if such tax has not been deducted or after deduction has not been paid on or before
the due date of return specified in section 139(1)

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8. No deduction is allowed from the dividend income received via buyback of shares by a
company from 01-10-2024.

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