Income from Other Sources

56 Charging section
57 Deductions
58 Amounts are not deductible
59 Profits that are taxable under this head

56
Section 56(1)

Any income which is not specifically exempt

which is not covered under any of the other four heads

Ex: Income from subletting

Interest on deposits
Ground rent
Rent of vacant land
Insurance commission
Family pension
Salaries to MP
Agricultural income from a place outside India

Section 56(2)

1 Dividend From a foreign company is always taxable

From a domestic company is exempt to the extent of Rs.10 la

The balance amount is taxable @ 10%

2 Winnings from lottery, Crossword puzzle, races, betting etc.,

No deduction is allowed
The entire amount of winnings is taxable
Grossing up has to be done
Gross 100000
TDS 30000
Net 70000
 70000*100/70 100000

3 Employees contribution to PF, superannuation fund or any other fund for the

10 1000 10000 IOS

10000 Deduction u/s.57
Nil taxable amount

4 Interest on securities
Accounts maintained on mercantile basis
Accounts maintained on cash basis

5 Hiring of furniture, plant & machinery

6 Hiring of furniture, plant and machinery along with building

7 Sum received under Keyman insurance policy

8 Interest received on enhanced compensation

9 Gift 56(2)(x)

1 Any amount in excess of Rs.50000 is taxable as gift

2 Movable property
without consideration
FMV exceeds consideration by more than 50000
FMV
Actual consideration paid

A
3 Immovable property
Without consideration Stamp duty value exceeeds

Inadequate consideration

difference between SDV and consideration is Rs.50000 (or) 5

 SDV - consideration becomes the value of Gift received

considration paid
SDV
Difference
105% of sale considrartion

Property includes
Immovable property - land or building or both
Shares and securities
Jewellery
Drawings & paintings
Sculptures & any work of art
Bullion

The above section is not applicable if Gift has been received

1 From a relative
2 During a marriage
3 under a will
4 In contemplation of death
5 Trust registered u/s.12AA

Relative means
1 Spouse
2 Brother or sister
3 Brother or sister of spouse
4 Lineal ascendent or descendent
5 Lineal ascendent or descendent of spouse
6 Brother or sister of parents
7 Spouses of any of the abvoe

10 Advance received for sale of capital asset, if forefeited becomes IOS

Section 57

57(i) Commission or remuneration paid for realising the dividend or interest on sec
57(ia) Deduction iro staff welfare fund
If the amount is deposited in to the fund before the due date, then the entire a

57(ii) Repairs, insurance

Depreciation is also allowed as deduction

57(iia) Deduction from family pension

Rs.15000 or 1/3rd of family pension, whichever is less is allowed as deductio

57(iii) Any related expenditure is allowed as a deduction provided

a) Wholly and exclusively incurred in earning that income
b) Not capital in nature
c) Not personal in nature
d) Should have been incurred during the relevant PY

57(iv) Interest on enhanced compensation

50% of interest is allowed as deduction

58(1) Personal expenses are not deductible

Interest / remuneration payable outside India without TDS
58(2) Similar 40(A) in PGBP
40A(2) Related party transaction
40A(3) Paid in cash in excess of Rs.10000

58(3) No deduction iro royalty and technical fees paid to foreign company

58(4) No deductions will be allowed against winnings from lottery, crossword puzz

59 Profits chargeable to tax S.41 in PGBP

 15-17 Salary 15
22-27 HP 22
28-44 PGBP 28
45-55 CG 45
56-59 OS 56

pt to the extent of Rs.10 lakhs u/s.10(34)

 or any other fund for the welfare of the employees

- income to be reported on due basis

- income to be reported on receipt basis

If cost exceeds Rs.50000, the entire amount is taxable

200000
Actual consideration paid 100000

-> B 100000 is taxable as IOS in the hands of B

tamp duty value exceeeds Rs.50000 SDV become IOS

eration is Rs.50000 (or) 5% of consideration

alue of Gift received

100000
200000
100000 >50000
105000

d becomes IOS

dividend or interest on securities

due date, then the entire amount deposited is allowed as deduction

ess is allowed as deduction

that income

oreign company

m lottery, crossword puzzle, card games, races, betting etc.

 Ms. T who draws a salary of Rs.20000 pm received the following gifts during the PY

1 Gift of 500000 from a friend

2 Gift of jewellery fair market value of which 300000 from his fiancee
3 Gift of 51000 each received from her four friends during her marriage
4 Gift of 100000 received from her mother's sister
5 Gift of 60000 received from her father's brother
6 Gift of 50000 from her husbands friend
7 Gift of 21000 from her mother's friend
8 Gift of 26000 from her brother's father in law
9 Gift of 121000 from her husband's brother
10 Gift of 26000 from her employer
11 Scholarship of 1200000 from a charitable institution registered u/s.12AA
12 She purchased a immovable property from B who is not a relative for 2450000, who
13 She purchased bullion for 440000, whose FMV is 485000
14 Gift of immovable property from friend whose SDV is 500000
Compute her total income for AY 2020-21

Soln Name of the assessee Ms T

AY 2020-21
Status Individual
PAN

Income from salary 20000 x 12

Add: Perquisite taxable u/s.17 - Gift from employer

Income from Other sources

Gift of 500000 from a friend
Gift of jewellery fair market value of which 300000 from his fiancee
Gift of 51000 each received from her four friends during her marriage
Gift of 100000 received from her mother's sister
Gift of 60000 received from her father's brother
Gift of 50000 from her husbands friend
Gift of 21000 from her mother's friend
Gift of 26000 from her brother's father in law
Gift of 121000 from her husband's brother
Gift of 26000 from her employer
Scholarship of 1200000 from a charitable institution registered u/s.12AA
She purchased a immovable property from B who is not a relative for 2450000, who
She purchased bullion for 440000, whose FMV is 485000
Gift of immovable property from friend whose SDV is 500000

Cons
5%
Total
g gifts during the PY

m his fiancee
ng her marriage

egistered u/s.12AA
ot a relative for 2450000, whose SDV is 2600000

240000
26000 266000

500000
m his fiancee 300000
ng her marriage 0
0
0
50000
21000
26000
0
0
egistered u/s.12AA
ot a relative for 2450000, whose SDV is 2600000 150000
45000
500000 1592000

Total income 1858000

2450000
122500
2572500
 X received the following amounts during the PY 2019-20

1 Gift of bullion worth Rs.60000 on his birthday from friend

2 Received a car from his cousin paying 100000, whose FMV was 400000
3 Received cash gift of 18000 each from 3 friends A B & C
4 Acquired office builiding from friend Q for 10 lakh, whose SDV is 20 lakhs
5 In respect of land of X acquired by railways in year 2010 he received interest on
enhanced compensation on court order as follows
145000 for PY 2017-18
175000 for PY 2018-19
110000 for PY 2019-20

Compute his income from Other Sources

Soln:
Gift of bullion worth Rs.60000 on his birthday from friend
Received a car from his cousin paying 100000, whose FMV was 400000
Received cash gift of 18000 each from 3 friends A B & C
Acquired office builiding from friend Q for 10 lakh, whose SDV is 20 lakhs
In respect of land of X acquired by railways in year 2010 he received interest on
enhanced compensation on court order as follows
145000 for PY 2017-18
175000 for PY 2018-19
110000 for PY 2019-20
Interest on enhanced compensation
Deduction u/s.57

Income from other sources

s 20 lakhs
eived interest on

60000
0
54000
s 20 lakhs 1000000
eived interest on

ensation 430000
215000 215000

rom other sources 785000

Question 1
Which of the following conditions need to be satisfied, so that an income can be taxed
a) Assessee has an income
b) Income should not be tax exempt
c) Income should not be taxable under any of
d) All of the above

Question 2
Aman earned certain interest income, which he wants to offer to tax under the head “In
a) Only on accrual basis
b) Only on cash basis
c) Accrual or cash basis, whichever is more
d) None of the above

Question 3
As per Section 56(2), which of the following income are not chargeable to tax under th
a) Occasional one time gains derived from sale of
b) Winning from lotteries, crossword puzzles and races
c) Interest on securities which is not chargeable to tax
d) Sum received under Keyman insurance policy not

Question 4
SunSun India Private Limited, an Indian company, declared dividend amounting to Rs.
a) 2,50,000
b) 2,00,000
c) Nil
d) 5,00,000

Question 5
Arun owned certain securities as on 31.3.2018, on which interest of Rs. 1,00,000 was r
a) Collection charges paid to banker
b) Interest on money borrowed to make such
c) Both A and B
d) Either A or B

Question 6
Mr. Ram owns a house property. He lent it to Laxman at`10,000 p.m. Laxman sublet it t
a. Income from Salary
b. Income from Other Sources
c. Income from House Property
d. Income from Business

Question 7
Which is the charging section for income chargeable under the head Income from othe
A. Section 15
B. Section 28
C. Section 22
D. Section 56

Question 8
DS was dealing in the business of lotteries. He himself won a lottery. Income earned fro
A. Taxable under the head Profit and Gains of Business
B. Taxable under the head Income from other sources C. Exempt
D. None of these

Question 9
Amount paid to or received by a shareholder in proportion to its shareholding in a com
A. Share
B. Dividend
C. Bonus
D. Profit

Question 10
Cash gifts exceeding ___ shall be chargeable under the head income from other sources
A. Rs.5,000
B. Rs.20,000
C. Rs.50,000
D. Rs.25,000

Question 11
The taxability of gift shall not apply if this gift is received from:
A. Relative
B. Local authority
C. By way of inheritance
D. All of these
Question 12
Mrs. X received the following gifts during the year. Which gifts shall be included in com
A.
B.
C.
D.

Question 13
Richa received gift of jewellery, fair market value of which is Rs.` 3,00,000 on 17th Oct
A. Nil
B. Rs.3,00,000
C. Rs.2,50,000
D. Rs.50,000

Question 14
If A receives Rs.31,000 from B and Rs.20,000 from C, then, what will be the taxable am
A. Nil
B. Rs.1,000
C. Rs.51,000
D. Rs.50,000

Question 15
Nisha received a gift from his sister in Netherlands of Rs.2,50,000. What will be the tax
A. Exempt
B. Rs.2,50,000
C. Rs.2,00,000
D. Rs.50,000

More examples on Gifts

1. Krishna received Rs.1,50,000 from his friend residing in Canada.
Tax Treatment: Rs.1,50,000 received from his friend will be fully taxed because frien
2. Venkat received Rs.25,200 from his elder brother residing in Mumbai.
Tax Treatment: Rs.25,200 received from elder brother will not be charged to tax beca
More examples on Gifts
3. Lakshmi received Rs.54,000 from his friend residing in Delhi (received on the occas
Tax Treatment: Birthday is not covered in the list of prescribed occasion on which gif
4. Raja received Shares from his father, the fair market value (i.e. value as per stock ex
Tax Treatment: Nothing will be charged to tax in respect of shares received from his
More examples on Gifts
5. Raja received Jewellery from his friend, the fair market value of the jewellery is Rs. 8
Tax Treatment: Friend is not covered in the definition of relative and hence, in respec
6. Raja received Jewellery from his friends and relatives on the occasion of his marriag
Tax Treatment: Marriage is covered in the list of specified occasions, and hence, noth
More examples on Gifts
7. Raja purchased Gold jewellery for Rs. 1,84,000, FMV being Rs. 2,84,000 & Bullion fo
Tax Treatment: Gold jewellery and bullion are covered in the definition of specified m
8. Raja purchased Motor car for Rs. 1,52,000, the fair market value of car is Rs. 2,52,00
Tax Treatment: Motor car does not come under the definition of prescribed movable
n income can be taxed under the head “Income from Other Sources” ?

the other heads

o tax under the head “Income from other sources” on cash basis. However, he wants to claim deduction f

beneficial to him

rgeable to tax under the head “Income from Other Sources” ?

capital asset
including horse races.
under the head PGBP
taxable under Salaries or PGBP

dend amounting to Rs. 5,00,000 out of which 50% were received by Sumit. He wants to claim deduction

st of Rs. 1,00,000 was received. The deductions which shall be allowed to Arun against such interest inco

Investments

p.m. Laxman sublet it to Mr. Maruti on monthly rent of`20,000 p.m. Rental income of Laxman is taxable
head Income from other sources?

tery. Income earned from such lottery will be

or Profession

s shareholding in a company out of the total sum so distributed is known as:

me from other sources:

hall be included in computing the income from other sources?
Gift of Rs.26,000 from her employer.
Gift of Rs.71,000 on December from mother's friend.
Gift of Rs.1,21,000 from her husband's brother.
Gift of Rs.60,000 on 25th November father's brother

.` 3,00,000 on 17th October from her fiancee. What will be the taxable amount?

t will be the taxable amount?

00. What will be the taxable amount?

lly taxed because friend is not covered in the definition of ‘relative’ and amount exceeds Rs. 50,000/-
Mumbai.
t be charged to tax because elder brother is covered in the definition of ‘relative’.

(received on the occasion of her birthday).

d occasion on which gift is not charged to tax, hence Rs.54,000 received on the occasion of birthday will
e. value as per stock exchange) of the shares on the date of gift was Rs. 2,84,000
ares received from his father, since father comes under the definition of the term ‘relative’.

of the jewellery is Rs. 84,000.

ve and hence, in respect of jewellery received from his friend, the fair market value, i.e., Rs. 84,000 will b
occasion of his marriage, the fair market value of jewellery is Rs. 2,52,000
asions, and hence, nothing will be charged to tax in respect of jewellery received from his friends and rel

. 2,84,000 & Bullion for Rs. 5,50,000, FMV being Rs. 6,00,000.
definition of specified movable property.. The excess of FMV over the purchase price will amount to Rs.1
lue of car is Rs. 2,52,000
of prescribed movable property, hence, nothing will be taxed in respect of purchase of motor car.
ants to claim deduction for certain expenditure on accrual basis. He can claim deduction __________

wants to claim deduction of Rs. 50,000 against dividend income. The taxable income in the hands of Sum

against such interest income would be __________

me of Laxman is taxable under the head______________.

 exceeds Rs. 50,000/-

occasion of birthday will be fully taxed.

m ‘relative’.

alue, i.e., Rs. 84,000 will be charged to tax in the hands of Mr. Raja.

d from his friends and relatives on the occasion of his marriage.

price will amount to Rs.1,50,000 (Rs. 1,00,000 for gold jewellery and Rs.50,000 for bullion) which is mor

hase of motor car.

on __________

n the hands of Sumit would be Rs. _________

llion) which is more than Rs. 50,000. Hence, the entire excess of FMV over purchase price will be charge
rice will be charged to tax in the hands of Mr. Raja.