INCOME FROM OTHER

SOURCES

Income from other sources covered under

section 56 to 59.
56 - Chargeability
57 - Deduction allowed under this head
58 – Amount not deductible under this head
59 – Deemed income
 CHARGEABILITY
The incomes which are chargeable under
this head is covered under sections 56(1) & 56(2)
Section 56(1) : Inclusive one
- There must be income
- Such income is not exempt under this Act
- Such income is not chargeable to tax under
any of first four head of income as per sec. 14.
All such incomes are taxable under this head
As per this section, this head is residuary one
S. No EXAMPLES OF INCOME u/s.56(1)
1 Income from subletting
2 Income from insurance commission
3 Family Pension(331/3 % of Rs.15000 w.e.l. is exempt)
4 Directors sitting fees
5 Interest on bank/company deposits, loans
6 Remuneration received by MP, MLAs
7 Examiners fees received by a teacher
8 Rent from vacant piece of land
9 Interest on income tax refund
10 Royalty income
11 Directors commission for giving guarantee
12 Directors commission for underwriting shares
13 Income from grant of grazing rights
14 Service charges received from tenants apart
from rent
15 Gratuity /perquisites received by a director who is
not an Employee of the company
16 Agri. income from land situated outside India
17 Interest on employee contribution to URPF
18 Income from rights of ferry or moorings
19 Income from granting of mining rights
20 Income from racing establishment
 SECTION 56(2)
This section enlist the following incomes
which are exclusively taxable under the head
income from other sources. They are

1 Dividend income
2 Winning from lotteries, card game, etc
3 Any sum received from employees as
contribution to PF, Welfare fund
4 Interest on securities
5 Income from letting of machinery, plant on hire
6 Income from letting of machinery, plant,
etc and building which are inseparable
7 Any sum Keyman insurance policy
including bonus.
8 Gifts in excess of Rs.50000/-
9 Valuation of unquoted equity shares
10 Interest received on compensation or
enhanced compensation
11 Forfeiture of advance received for transfer of a
capital asset from the Ass. Year 2015-16
 Dividend is the distribution of current years profit or
accumulated profits of past years to the shareholders in
proportion to their holdings
As per section 10(34), any payment of dividend
(interim /final) by domestic company after 01/04/2003
including deemed dividend except as mentioned in section
2(22) (e) is exempt from tax as the company might have paid
dividend distribution tax @15% as per section 115O.
However, dividend or deemed dividend from foreign
company is taxable under this head.
 In the union Budget for 2016-2017 , a new section
115BBDA was inserted. According, a tax at the rate of
10% on dividends received by Individuals, HUF and firm
where dividend income exceeds Rs.10 lakh in any year.
Such dividend will also be included in the total
income.
Dividend include deemed dividend except
section 2(22)(e).
Section Deemed Dividend Taxability
Distribution of all or any part of the assets of
2(22)(a) the company to the extent of accumulated Exempt
profits to its shareholders deemed to be
dividend
2(22)(b) Distribution of debentures, deposit certifi-
cates and bonus shares with or without Exempt
interest to the extent of accumulated profit by
a company to its shareholders deemed to be
dividend
2(22)(c) Distribution at the time of liquidation of the
company to the extent of accumulated profit Exempt
is deemed to be dividend
2(22)(d) Distribution by the company on its reduction
of capital to the extent of accumulated profit Exempt
deemed to dividend
2(22)(e) Distribution of loans and advance by a Taxable
company (Other than co. in which public are
substantially interested) to certain shareholders
to the extent of AP deemed to be dividend
The loan or advance may be given to :
1. Equity shareholders holding not less than 10% of the voting power
2.Any concern in which such shareholder (>10%) is a member or a
partner and holds substantial interest.
3. any person on behalf or for the benefit of shareholders holding not
less than 10% of the voting power.
Substantial interest means entitled for 20% profit or holds atleast 20%
of the shares in case of company.
ACCUMULATED PROFIT(AP): It means the commercial profits and
not assessed income and includes credit balance in the profit and
loss account, general reserves, investment allowance upto the date of
distribution or liquidation but not does not include capital receipts and
specific provisions.
When it is exempted?
Any advance or loan to a shareholder and money lending is the
major business of the concern.
 DEDUCTION FROM DIVIDEND INCOME

As per section 57 of the Act, the following

expenses can be deducted from dividend income.

- collection charges

- Interest on loan

- Any other expenditure not being capital exp.

However, if dividend is exempted as per

section10(34) nothing is deductible.
This includes any winning from:-
A] lotteries
B] crossword puzzles
C] Races including horse races
D] Card games and other games of any sort
E] Gambling or betting of any form or nature
and are chargeable to tax as income from other
sources
Tax rate These incomes are taxed at a flat rate of
30% plus cess
Grossing up These income will be given to the
Section winners only after deducting tax,
115BB therefore, while showing it as income
under the head Income from other
sources, it should be grossed up.
Deduction As per section 58(4), nothing is
deductible from these kind of income
Set off No loss can be set off/adjusted against
these income CIT Vs. MAM Ramasamy
Income of Income to an agent by means of prizes
lottery agent on unsold/unclaimed lottery tickets in his
possession is PGBP (Director of state
lotteries Vs CIT)
Other sources (CIT Vs. Manjoo and co)
 Employers normally deduct employees share of
contribution towards PF or other welfare fund from their
salaries.

Such sum, included as income of the employer

at the first instance- Section 56(2)(ic).

If the employers deposited such amount before

the due date of such deposit, then that can be claimed
as deduction from their income – Section 57(ia) .
As per section 2(28B) IOS means
Interest on securities issued central/state Govt.
Interest on debentures/bonds issued by LA

Interest on debentures/bonds issued by Companies

Interest on debentures/bonds issued by companies
established by Central/state Govt.
Bond washing transactions – section 94(1)
Sales cum interest – section 94(2)
Bonus Striping – section 94(8) Record date
Exemption: Section 10(15)
Post office SB Interest – Exempted Rs.3500/-
National Defence Gold Bonds
Special Bearer Bonds
National Savings Certificate (NSC)
SB Interest on Bank/Co-op Society deposit – taxed but deduction
under section 80TTA – subject to maximum of Rs.10000/-
If any TDS was made on Interest, it should be grossed up.
Deduction from Interest – Sec 57(i) & (ii)
collection charges, interest on loan & any other revenue
expenditure
Sec. 56(2)(vi) – Gift in cash
from 01/04/2006 to 01/10/2009
If Individual or HUF receives from any person
any sum of money the aggregate of which > Rs.50000/-
The entire sum taxed as Income from other sources
Sec. 56(2)(vi) – Gift received in kind (i.e. properties)
from 01/04/2006 to 01/10/2009
If Individual or HUF receives from any person
Exempted as it is not covered under Sec 56(2)(vi)
Sec. 56(2)(vii)(a) – Gift of money
with effect from 01/10/2009
If Individual or HUF receives from any person
any sum of money the aggregate of which > Rs.50000/-
The entire sum taxed as Income from other sources
Sec. 56(2)(vii)(b) (i) – Gift immovable property
with effect from 01/10/2009
If Individual or HUF receives from any person
immovable property without consideration or for inadequate
consideration > Rs.50000/- (stamp duty value taxed in recipient hand)
Sec. 56(2)(vii)(b) (i) – Gift movable property

with effect from 01/10/2009

If Individual or HUF receives from any person

immovable property without consideration or for inadequate

consideration > Rs.50000/- (FMV taxed in recipient hand)

Immoveable property : Land or building or both

Moveable property: Shares & Debentures, Jewellery, Bullion,

Drawings painting, sculptures, any work of art and archaeological
collection.
Exemption:
Money or property received from relatives
M or P received on the occasion of marriage of the individual

M or P received by will or inheritance

M or P received in contemplation of death
M or P received from local authority
M or P received charitable institute registered u/s 12AA
M or P received any fund, foundation, university or other
educational institution, hospital, medical institution, any trust or
institution u/s 10(23C)
Relatives:

1] Spouse of the individual

2] Brother or sister of the individual

3] Brother or sister of the spouse of the individual

4] Bro. or Sis of either of the parents of the individual

5] Any lineal ascendant or descendant of the Individual

6] Any lineal ascendant or descendant of the spouse of the Ind.

Spouse of the person referred in 2 to 6

Received from group of relatives also exempted

Section 145 A(b)
Income by way of interest received on compensation
or on enhanced compensation taxable as IOS
Section 57(iv) 50% of such income allowed as deduction
Forfeiture of advance money: Sec 56(2)(x)
From A Y 2015-16
Advance money received forfeited
Negotiation not result in transfer of capital assets
Not adjustable on the cost of acquisition.
Section 145 A(b)
Income by way of interest received on compensation
or on enhanced compensation taxable as IOS
Section 57(iv) 50% of such income allowed as deduction
Forfeiture of advance money: Sec 56(2)(x)
From A Y 2015-16
Advance money received forfeited
Negotiation not result in transfer of capital assets
Not adjustable on the cost of acquisition.
 The following expenses are not deductible under
Income from other sources
Personal expenses
Interest paid outside India without TDS
Salary paid outside India without TDS
Wealth tax paid
Royalty and technical fees paid to Foreign companies
Expenditure in the case of winning from lotteries
No deduction under chapter VIA for casual income
No deduction under section 57 for casual income
No set off of loss against casual income