INCOME FROM OTHER

SOURCES
 BASIS OF CHARGE OF INCOME FROM OTHER
SOURCES- SECTION 56
• Income chargeable under Income-tax Act, which does not
specifically fall for assessment under any of the heads discussed
earlier, must be charged to tax as “income from other sources”.

• This head is thus a residuary head of income under which income

can be computed only after deciding whether the particular item of
income is otherwise assessable under any of the first four heads.

• Section 56(2) covers certain specific incomes which are chargeable

under the head “Income From Other Sources”.

• Section 56(1) covers all the residual incomes which are not covered
by first Four Heads of Income.
In other words any income is taxable under this head if following
conditions are satisfied:
1. There is an Income.
2. Such income is not exempt under any provisions of the Income
Tax Act.
3. Such income is not taxable under First four heads of Income.

The following specific incomes are chargeable to Income Tax

under the head “Income from other sources” under Section 56(2)
• Dividends : Dividend income other than divided referred under
section 10(34) not exceeding Rs. 10 lakh shall be included
under income from other sources.

• Keyman Insurance policy : Amount received under a Keyman

insurance Policy, including bonus on such Policy, if it is not
taxable under any other head of income shall be chargeable
under Income from other sources.
• Winnings from lotteries : Any 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 shall
be chargeable to tax under Income from other sources.

• Contribution to Provident fund : Income of the nature referred to

in Section 2(24)(x) (relating to certain contributions to any
provident fund or superannuation fund or any fund set up under
the provisions of the ESI Act or any other fund for the welfare of
such employees received by the assessee from his employees in
his capacity as an employer) will be chargeable to income-tax
under the head “income from other sources” if such income is not
chargeable to income-tax under the head “profits and gains of
business or profession”. But if the employer deposits such amount
on or before due date of deposit applicable for such contribution,
he will be allowed a deduction on account of the same.
• Income by way of interest on securities : if the income by way of
interest on securities is not chargeable to income-tax under the
head,” Profits and gains of business or profession”, then such
income shall be taxable under Income from other sources.

• Income from hiring of machinery, etc : Income from machinery,

plant or furniture belonging to the assessee and let on hire; if the
income is not chargeable to income-tax under the head “profits
and gains of business or profession” shall be taxable under Income
from other sources.

• Hiring out of building with machinery etc. : Where an assessee

lets on hire machinery, plant or furniture belonging to him and
also building and the letting of the building 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” shall be taxable under
Income from other sources.
• Share premiums in excess of the fair market value to be
treated as income - Where a company, not being a company
in which the public are substantially interested, receives, in
any previous year, from any person being a resident, any
consideration for issue of shares that exceeds the face value of
such shares, the aggregate consideration received for such
shares as exceeds the fair market value of the shares shall be
taxable under Income from other sources.

• Advance money received- any sum of money, received as an

advance or otherwise in the course of negotiations for transfer
of a capital asset is chargeable to income-tax under the head
“Income from other sources”, if such sum is forfeited and the
negotiations do not result in transfer of such capital asset.

• Receipt of Money or Property without consideration or

without adequate consideration by any person.
 OTHER INCOMES TAXABLE
• Any sum of money, without consideration, the aggregate value of which
exceeds INR 50,000, the whole of the aggregate value of such sum.
• Any immovable property without consideration, the stamp duty value of
which exceeds INR 50,000, the stamp duty value of such property is
chargeable to tax.
• any property, other than immovable property, without consideration, the
aggregate fair market value of which exceeds INR 50,000, then the whole
of the aggregate fair market value of such property.
• All interest other than interest on securities, e.g. interest on bank deposits,
interest on loan, etc.
• Income of a tenant from sub-letting the whole or a part of the house
property.
• Rent of land not appurtenant to any building.
• Agricultural Income from land situated outside India.
• Remuneration received for writing articles in Journals.
• Salary of a Member of Parliament, Member of Legislative Assembly or
Council.
• Casual income
 CASUAL INCOME
• Casual income includes income by way of winnings from lotteries;
crossword puzzles; races including horse races; gambling and
betting of any nature or form; card games, game show or
entertainment program on television or electronic mode and any
other game of any sort. All these incomes are chargeable to tax
under the head income from other sources. However, following
income are not chargeable under the head “income from other
sources”:
• Lottery held as stock in trade: Winning from lottery to an agent or
trader out of its unsold stock of lottery tickets shall be treated as
incidental to business and taxed under the head “profit and gains of
business or profession “.
• Income of jockey: Income of jockey from such profession is not
treated as winning from the horse races.
• Winning from a motor car rally: Winning from a motor car rally
is a return for skill and effort and cannot be created as casual
income, these are taxable as normal income.
• No deduction or exemption is provided in respect of the casual
income.
• No deduction can be claimed from such income even if such
expenditure is incurred exclusively and wholly for earning such
income.
• Further, deduction under section 80C to 80U is also not available
from such income.
• Taxation of Casual Income: Casual income is liable to TDS. The
casual income is taxed at a flat rate of 30% plus surcharge (if
any), plus cess.
 INCOME FROM FAMILY PENSION
• Family pension is a regular amount payable by the employer to a
family member of a deceased employee. It is taxable under the head
income from other sources. The income by way of family pension is
eligible for a standard deduction under section 57(iia) which is either
1/3rd of such pension or Rs. 15000 whichever is lower.
• Family pension received by the widow or children or nominated
heirs, as the case may be, of a member of the armed forces
(including paramilitary forces) of the Union, where the death of such
member has occurred in the course of operational duties, in such
circumstances and subject to such conditions, as may be prescribed,
shall be exempt from tax.
• Further, income by way of family pension received as family pension
of an individual who has been in the service of Central/State
Government and has been awarded Param Vir Chakra or Maha Vir
Chakra or Vir Chakra or such other gallantry award as may be
notified is also exempt from tax.
 DEDUCTIONS
• From interest on securities : Any reasonable sum paid by way of
commission or remuneration to a banker or any other person for
the purpose of realising such interest on behalf of the assessee.
Interest on money borrowed for investment in securities can be
claimed as a deduction.
• Income derived from letting : Where income is derived from letting
out of machinery, plant or furniture on hire and also buildings
where the letting of building is inseparable from the letting of such
machinery, plant or furniture and the income from such letting is
not chargeable to Income-tax under the head “Profits and Gains of
Business or profession”, the following expenses incurred in respect
of those assets:
(a) Current repairs of buildings.
(b) Insurance premium against risk of damage or destruction of the
premises.
(c) Current Repairs and insurance of machinery, plant or furniture.
• Income in the nature of family pension : Where a regular
monthly amount is payable by an employer to a person
belonging to the family of an employee in the event of his
death, i.e., “family pension”, a sum equal to 33-1/3% of the
income or Rs. 15,000, whichever is less, is allowable as a
deduction.

• Other deductions : Any other expenditure (not being in the

nature of capital expenditure) laid out or expended wholly and
exclusively for the purpose of making or earning such income.
 AMOUNTS NOT DEDUCTIBLE-SECTION 58
• The following amounts shall not be deducted in computing
income chargeable under the head “Income from other Sources”.
• Any personal expenses of the assessee.
• Any expenditure referred to in Section 40A of Income-tax Act.
• No deduction is allowed in respect of any expenditure or
allowance in computing the income by way of 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. The prohibition however will not
apply in respect of income of an assessee who is owner of horses
maintained for running in horse races.
• The amount is taxable at source and it does not matter whether
amount goes to one or more recipients. Similarly, the amount
spent in buying of in fructuous tickets is not deductible.
 DEEMED INCOME
• Where any allowance or deduction has been provided in the
assessment of Income under the head “Income From Other
Sources” in any Assessment Year in respect of loss or
expenditure or trading liability incurred by the assesse and
later on during any previous year any amount or any remission
or any benefit is obtained by assesse (whether in cash or
otherwise) then such amount or remission or benefit shall be
taxable under the head “ Income From Other Sources” in the
previous year in which it is so obtained.