Income Tax And Practices : All about the other sources of income which are fully taxable and deductions allowed this head .

1. INCOME TAX
LAW
AND PRACTICE
TOPIC: INCOME FROM OTHER SOURCES

2. What is Income From Other Sources ?
 As per section 56(1), income of every kind, which is not to be excluded from the total income under this act,
shall be chargeable to income-tax under the head "income from other sources" if it is not chargeable to
income-tax under any of the first four heads specified in section 14.
 In other words, the following conditions must be satisfied before an income can be taxed under the head “
Income from other sources” :
• There must be an income;
• Such income is not exempt under the provisions of this act;
• Such income is not chargeable to tax under any first four heads :
1. “Income from salary",
2. “Income from house property",
3. “Profits and gains of business or profession" and
4. “Income from capital gain".

3. INCOMES ALWAYS TAXABLE UNDER THE HEAD
“INCOME FROM OTHER SOURCES”
1. DIVIDEND
Dividends, other than the dividends referred to in section 115-O. However, w.E.F. A.Y. 2017-
18, certain dividends received from domestic companies shall be chargeable to tax in
accordance with the provisions of section 115BBDA even if the tax has been paid by the
domestic company under section 115-O;
2. WINNING FROM LOTTERIES, ETC.
It includes 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
whatsoever. These receipts are chargeable to tax under the head “income from other sources”.

4. 3. EMPLOYEES' CONTRIBUTION TOWARDS STAFF WELFARE SCHEME
Any sum received by the assesse 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 'Profits and Gains of Business or Profession'.
4. INTEREST ON SECURITIES
Interest on debentures, Government securities/bonds is taxable under the head
“Income from other sources” provided the income is not chargeable to Income-tax
under the head profits and gains of business or profession.
5. RENTAL INCOME OF MACHINERY, PLANT OR FURNITURE
Income from machinery, plant or furniture belonging to the assesse and let on hire,
provided the income is not chargeable to Income-tax under the head profits and gains
of business or profession.

5. 6. RENTAL INCOME OF LETTING OUT OF PLANT, MACHINERY OR FURNITURE ALONG
WITH LETTING OUT OF BUILDING AD (THE TWO LETTINGS ARE NOT SEPARABLE)
Where the assesse 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. SUM RECEIVED UNDER KEYMAN INSURANCE POLICY
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. GIFT
Any sum of money, the aggregate value of which exceeds ₹50,000 is received without
consideration or property (whether movable or immovable) is received without
consideration or property is received for an inadequate consideration by any person on or
after 1.4.2017, if the amount of such gift or inadequate consideration exceeds ₹50,000 .

6. 9. INTEREST ON COMPENSATION OR ENHANCE COMPENSATION
Income by way of interest received on compensation or on enhanced compensation shall be assessed
under the head “Income from other sources” in the year in which it is received.
However, 50% of such interest is deductible under section 57(iv). Consequently, only 50% of such
interest is taxable.
10. Advance Money Received in the course of negotiations for transfer of a Capital Asset.
Where any sum of money, received as an advance or otherwise in the course of the negotiations for
transfer of a capital asset, is forfeited and the negotiations do not result in transfer of such capital asset,
then, such sum shall be chargeable to income-tax under the head “Income from other sources”.
COMPENSATION ON TERMINATION OF EMPLOYMENT OR MODIFICATION OF TERMS OF
EMPLOYMENT
Any compensation or other payment referred to in section 56(2)(xi) [i.e., compensation on termination
of employment or modification of terms of employment] is treated as income from other sources.

7. DEDUCTIONS [SEC. 57]
S.NO. SECTION NATURE OF INCOME DEDUCTIONS ALLOWED
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 (other than dividends referred to
in section 115-O) or interest on securities .
2. 57{i(A)} Employee’s contribution towards
Provident Fund, Superannuation
Fund, ESI Fund or any other fund
setup for the welfare of such
employees
If employees’ contribution is credited to their account in
relevant fund on or before the due date .
THE FOLLOWING EXPENDITURES ARE ALLOWED AS DEDUCTIONS FROM INCOME CHARGEABLE TO
TAX UNDER THE HEAD ‘INCOME FROM OTHER SOURCES’:

8. S.NO. SECTION NATURE OF INCOME DEDUCTIONS ALLOWED
3. 57(ii) Rental income letting of plant,
machinery, furniture or building
Rent, rates, taxes, repairs, insurance and depreciation
etc.
4. 57(iia) Family Pension 1/3
rd
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 compensation
50% of such interest (subject to certain conditions)
7. 58(4) Proviso Income from activity of owning
and maintaining race horses.
All expenditure relating to such activity.

9. EXPENSES NOT DEDUCTIBLE [SECTION 58]:
S.NO. SECTION NATURE OF INCOME
1. 58(1)(a)(i) Personal expenses
2. 58(1)(a)(ii) Interest chargeable to tax which is payable outside India on which
tax has not been paid or deducted at source
3. 58(1)(a)(iii) ‘Salaries’ payable outside India on which no tax is paid or
deducted at source
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

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