Income from other sources

1. Income from Other Sources
Dr. NGPASC
COIMBATORE | INDIA
Dr. N.G.P. ARTS AND SCIENCE COLLEGE
(An Autonomous Institution, Affiliated to Bharathiar University, Coimbatore)
Approved by Government of Tamil Nadu and Accredited by NAAC with 'A' Grade (2nd Cycle)
Dr. N.G.P.- Kalapatti Road, Coimbatore-641048, Tamil Nadu, India
Web: www.drngpasc.ac.in | Email: info@drngpasc.ac.in | Phone: +91-422-2369100
Dr. R. Prema
Associate Professor in Commerce CA

2. Dr. NGPASC
COIMBATORE | INDIA
Other Sources
Income from
Other Sources
General
Incomes
Section 56 (1)
Specified
Incomes
Section 56 (2)

3. Dr. NGPASC
COIMBATORE | INDIA
INCOMES CHARGEABLE UNDER THIS HEAD [SECTION 56]
Dividend income
The term ‘dividend’ as used in the
Act has a wider scope and meaning
than under the general law.

4. Dr. NGPASC
COIMBATORE | INDIA
INCOMES CHARGEABLE UNDER THIS HEAD [SECTION 56]
Casual income
Income in the nature of winning from lotteries, crossword puzzles,
races including horse races, card games and other games of any sort,
gambling, betting etc. Such winnings are chargeable to tax at a flat rate
of 30% under section 115BB.

5. Dr. NGPASC
COIMBATORE | INDIA
INCOMES CHARGEABLE UNDER THIS HEAD [SECTION 56]
In order to prevent the practice of receiving sum
of money or the property without consideration
or for inadequate consideration, section 56(2)(x)
brings to tax any sum of money or the value of
any property received by any person without
consideration or the value of any property
received for inadequate consideration.
(ii) Sum of Money: If any sum of money is
received without consideration, and the
aggregate value of which exceeds ` 50,000, the
whole of the aggregate value of such sum is
chargeable to tax.
Any sum of money or value of property received without
consideration or for inadequate consideration to be subject
to tax in the hands of the recipient [Section 56(2)(x)]

6. Dr. NGPASC
COIMBATORE | INDIA
INCOMES CHARGEABLE UNDER THIS HEAD [SECTION 56]
(iii) Immovable property:
If an immovable property is
received
(a) Without consideration, the
stamp duty value of such
property would be taxed as
the income of the recipient if it
exceeds ` 50,000.
(b) For a consideration which is
less than the stamp duty value
of the property by an amount
exceeding ` 50,000, the
difference between the stamp
duty value and the
consideration shall be
chargeable to tax in the hands
of the assessee as “Income
from other sources”.

7. Dr. NGPASC
COIMBATORE | INDIA
INCOMES CHARGEABLE UNDER THIS HEAD [SECTION 56]
If movable property is received
(a) without consideration, the aggregate fair market value of such
property on the date of receipt would be taxed as the income of the
recipient, if it exceeds ` 50,000.
(b) for inadequate consideration, and the difference between the
aggregate fair market value and such consideration exceeds ` 50,000,
such difference would be taxed as the income of the recipient.
Movable Property

8. Dr. NGPASC
COIMBATORE | INDIA
INCOMES CHARGEABLE UNDER THIS HEAD [SECTION 56]
The provisions of section 56(2)(x) would apply only to property which is the
nature of a capital asset of the recipient and not stock-in-trade, raw material
or consumable stores of any business of the recipient. Therefore, only
transfer of a capital asset, without consideration or for inadequate
consideration would attract the provisions of section 56(2)(x).
Applicability of section 56(2)(x)

9. Dr. NGPASC
COIMBATORE | INDIA
INCOMES CHARGEABLE UNDER THIS HEAD [SECTION 56]

10. Dr. NGPASC
COIMBATORE | INDIA
INCOMES CHARGEABLE UNDER THIS HEAD [SECTION 56]
Non-applicability of section 56(2)(x):
(a) from any
relative; or
(b) on the
occasion of the
marriage of the
individual; or
(c) under a will or
by way of
inheritance; or
(d) in
contemplation of
death of the
payer or donor,
as the case may
be; or
(e) from any local
authority; or
(f) from any fund
or foundation or
university or
other educational
institution or
hospital or other
medical
institution or any
trust or
institution; or

11. Dr. NGPASC
COIMBATORE | INDIA
INCOMES CHARGEABLE UNDER THIS HEAD [SECTION 56]
Non-applicability of section 56(2)(x):
(g) from any trust
or institution
registered; or
(h) by any fund or
trust or institution
or any university or
other educational
institution or any
hospital or other
medical institution.
(i) by way of
transaction not
regarded as transfer
under section
47(vi)/
(vib)/(vid)/(vii).
(j) from an
individual by a trust
created or
established solely
for the benefit of
relative of the
individual.

12. Dr. NGPASC
COIMBATORE | INDIA
INCOMES CHARGEABLE UNDER THIS HEAD [SECTION 56]

13. Dr. NGPASC
COIMBATORE | INDIA
INCOMES CHARGEABLE UNDER THIS HEAD [SECTION 56]

14. Dr. NGPASC
COIMBATORE | INDIA
INCOMES CHARGEABLE UNDER THIS HEAD [SECTION 56]

15. Dr. NGPASC
COIMBATORE | INDIA
RATES OF TDS

16. Dr. NGPASC
COIMBATORE | INDIA
GROSSING UP

17. Dr. NGPASC
COIMBATORE | INDIA
PROBLEM
1. From the following particulars of Mr. Amarpreet Thind, compute the amount of taxable gifts
chargeable as “Income under the head other sources” :
(i) He received a cheque of ₹ 1,00,000 as a gift from his grandfather on 15 May 2019.
(ii) He received ₹ 21,000 from his friend from Canada as a gift on 31 May 2019.
(iii) He received ₹ 5,00,000 under a will from his grandmother on 30 June 2019.
(iv) He received ₹ 50,000 from his father’s friend on 30 June 2019.
(v) He received ₹ 75,000 as gift from his uncle on 30 September 2019 on his birthday.
(vi) He received ₹ 20,000 as gift from his employer on 1 October 2019.
(vii) He received a gift of ₹ 51,000 from his father’s brother on 30 November 2019.

18. Dr. NGPASC
COIMBATORE | INDIA
SOLUTION
Computation of Taxable Gifts under the head other sources for the P/Y 2019-20
Particulars ₹ ₹
He received a cheque of ₹ 1,00,000 as a gift from his grandfather on 15 May 2019.
(Exempt as received from relative)
Nil
He received ₹ 21,000 from his friend from Canada as a gift on 31 May 2019. 21,000
He received ₹ 5,00,000 under a will from his grandmother on 30 June 2019.
(Exempt as received under a will from relative)
Nil
He received ₹ 50,000 from his father’s friend on 30 June 2019. 50,000
He received ₹ 75,000 as gift from his uncle on 30 September 2019 on his birthday. 75,000
He received ₹ 20,000 as gift from his employer on 1 October 2019. Nil
He received a gift of ₹ 51,000 from his father’s brother on 30 November 2019.
(Exempt as received from relative)
Nil
Total Monetary Gifts 1,46,000

19. Dr. NGPASC
COIMBATORE | INDIA
PROBLEM
2. From the following particulars of Mr. X, compute the amount of taxable gifts chargeable as
“Income under the head other sources” :
(i) He received a plot worth ₹ 6,00,000 as a gift from his grandmother under a will
(stamp duty value is determined at ₹ 3,50,000) on 25 May 2019.
(ii) He received a house as gift on 15 June 2019 from his uncle, on his birthday worth
₹ 15,00,000 (stamp duty value is ₹ 10,00,000
(iii) He received a plot from his friend as gift whose F.M.V. as on 30 September 2019 was
₹ 75,000 and stamp duty value was ₹ 40,000
(iv) He purchased a house from Mr. R. for ₹ 2,50,000 on 1 October 2019 and the stamp
duty value was ₹ 4,00,000
(v) He received a house property as gift from a friend Mr. A. as his Stock-in-Trade (Mr. A.
is a property dealer) worth ₹ 15,00,000, whose stamp duty value is ₹ 8,00,000
(vi) Gift of wrist watch from a friend and the cost of the gift is ₹ 60,000
(vii) On his birthday, his partnership firm gave him a gift of a car worth ₹ 5,00,000

20. Dr. NGPASC
COIMBATORE | INDIA
SOLUTION
Computation of Taxable Gifts under the head other sources for the P/Y 2019-20
Particulars ₹ ₹
Gift from his grandmother (Exempt as received from relative) Nil
Gift from Uncle 10,00,000
Gift of Plot from Friend
(Exempt as Stamp Duty Value does not exceed 50,000)
Nil
Purchase of House ( Stamp duty value 4,00,000, Actual Consideration 2,50,000) 1,50,000
Gift of House property as stock-in-trade Nil
Gift of wrist watch from a friend ( Watch – Not a property) Nil
Gift of Car (Not a property) Nil
Total Monetary Gifts 11,50,000

21. Dr. NGPASC
COIMBATORE | INDIA
PROBLEM
3. Mr. Basu received the following gifts during the previous year 2019-20:
I) On 13 April, 2019, on his birthday, he received following gifts:
i) ₹ 11,000 from his father
ii) ₹ 11,000 from his grandfather
iii) ₹ 11,000 from his father’s cousin
iv) ₹ 5,000 from his father’s friend
v) ₹ 5,000 from his own friend
vi) ₹ 51,000 from his friend from U.S.A.
vii) ₹ 5,000 from his mother’s cousin
viii) ₹ 21,000 from other friends and neighbours
ix) He received a gift of an imported watch worth ₹ 35,000 from another friend from U.S.A.
II) On 20 September 2019, on the occasion of his marriage, he received the following gifts:
i) ₹ 11,000 from his mother
ii) ₹ 11,000 from his maternal uncle
iii) ₹ 11,000 from a friend of his father
iv) ₹ 5,100 from his friend
v) ₹ 51,000 from various friends, neighbours and relatives.
vi) ₹ 11,000 from his employer.

22. Dr. NGPASC
COIMBATORE | INDIA
PROBLEM
III) On 25 October 2019 , he received following gifts which were gifted to him by his
mother’s mother (Nani) through a will which she executed in his favour before her
death.
i) A plot worth ₹ 5,00,000
ii) Bank deposits worth ₹ 1,00,000
IV) A friend from America gifted him a computer worth ₹ 50,000 on 30 November
2019. Find out the amount of taxable gifts for the A/Y 2020-21.

23. Dr. NGPASC
COIMBATORE | INDIA
SOLUTION
Computation of Taxable Gifts under the head other sources for the P/Y 2019-20
I) Monetary Gifts
Particulars ₹ ₹
A) Monetary Gifts
Gift from Father Nil
Gift from Grandfather Nil
Gift from Father’s Cousin 11,000
from his father’s friend 5,000
Gift from his own friend
Gift from his friend from U.S.A.
Gift from his mother’s cousin
Gift from other friends and neighbours
5,000
51,000
5,000
21,000
On 20 September 2019 (on the occasion of marriage)
All monetary gifts are exempted
Gift of bank deposits from mothers’ mother (Exempted)
Nil
Nil
Total Monetary Gifts 98,000
Total Monetary Gifts exceeding 50,000, entire amount is taxable 98,000

24. Dr. NGPASC
COIMBATORE | INDIA
SOLUTION
Computation of Taxable Gifts under the head other sources for the P/Y 2019-20
Particulars ₹ ₹
B) Gift of Immovable property
Gifts of Immovable Property :
Gift of plot from mother’s mother
Nil
C) Gift of property other than Immovable property
Gift of Property other than immovable property:
Imported Watch
Nil
Gift of computer from America friend Nil
Total taxable gifts under the head other sources 98,000

25. Dr. NGPASC
COIMBATORE | INDIA
PROBLEM
4. Mr. A invested 1,00,000 in 9% tax-free debentures of a company. What
will be his taxable interest for the previous year ending on 31.3.2020 if
the rate of deduction of tax at source is @ 10%.
Ans:
Net interest due = 1,00,000 * 9/100 = 9,000
Grossed up = 9000 * [100 / (100-10)] = 9000*100/90 = 10,000

26. Dr. NGPASC
COIMBATORE | INDIA
PROBLEM
5. Calculate “Income under the head other sources” :
(i) Winnings from Lottery ₹ 1,00,000
(ii) Amount received from race winnings ₹ 35,000
Gifts received during the previous year 2019-20:
(i) Received ₹ 20,000 as gift from his friend.
(ii) Received ₹ 1,00,000 as gift from his elder brother.
(iii) Received ₹ 1,40,000 as gift on his marriage.
(iv) Received ₹ 80,000 as gift from his NRI friend on 1-1-2020.
(v) Another gift of ₹ 18,000 received from his friend.

27. Dr. NGPASC
COIMBATORE | INDIA
SOLUTION
Computation of Income from other sources for the P/Y 2019-20
Particulars ₹ ₹
Winnings from Lottery ₹ 1,00,000 1,00,000
Amount received from race winnings ₹ 35,000
Grossing up = Amount x 100 / 100-30
35000 x 100 / 100-30 50,000
Received ₹ 20,000 as gift from his friend. 20,000
Received ₹ 1,00,000 as gift from his elder brother. -
Received ₹ 1,40,000 as gift on his marriage. -
Received ₹ 80,000 as gift from his NRI friend on 1-1-2020. 80,000
Gift of ₹ 18,000 received from his friend. 18,000
Income from other sources 2,68,000

28. Dr. NGPASC
COIMBATORE | INDIA
PROBLEM
6. Mr. X has the following incomes during the year ending on 31-3-2020:
i) Dividend declared by M.Co. on 31-3-2019 (Indian Co.) ₹ 6,000
ii) Dividend declared by Z.Co. on 31-3-2019 (Indian Co.) ₹ 9,000
iii) Interim dividend received on 1-5-2019 (Indian Co.) ₹ 3,000
iv) He won gold worth ₹ 10,00,000 from Punjab state lottery
v) During March 2020 he earned ₹ 1,00,000 as prize money on horse
races. These horses are owned by him and expenditure incurred on
maintenance of these horses amounted to ₹ 1,60,000
Compute income from other sources.

29. Dr. NGPASC
COIMBATORE | INDIA
SOLUTION
Computation of Income from other sources for the P/Y 2019-20
Particulars ₹ ₹
Dividend declared by M.Co. on 31-3-2019 (Indian Co.) -
Dividend declared by Z.Co. on 31-3-2019 (Indian Co.) -
Interim dividend received on 1-5-2019 (Indian Co.) -
Gold from Punjab state lottery 10,00,000
Winnings from Horse race:
Prize money of horse race
Less: Expenses of maintenance of these horses
1,00,000
1,60,000
-
Loss to be carried forward 60,000 -
Income from other sources 10,00,000

30. Dr. NGPASC
COIMBATORE | INDIA
PROBLEM
7. Mr. G. Bedi owns horses at Bombay and Bangalore. Those horses run for
races at the race course. During the year 2019-2020 Mr. bedi submits the
following information's:
i) Exp on race horses at Bombay - 260000
ii) Exp on race horses at Bangalore – 430000
iii) Stake money earned by horses at
i) Bombay – 120000
ii) Bangalore – 500000
iv) Mr Bedi received 105000 on 1.7.2019 on betting during horse races at
Bombay.
Compute his taxable income under other sources.

31. Computation of Income from other sources for the P/Y 2019-20
Particulars ₹ ₹
A) Activity of maintenance of race horses
Income
At Bombay 120000
At Bangalore 500000 620000
Less: Expenses
At Bombay 260000
At Bangalore 430000 690000
Loss from activity of maintenance of race horses to be c/f 70000
B) Race winning:
Amount Received – 105000
Gross = 105000*100/70
150000
Income from other sources 150000Dr. NGPASC
COIMBATORE | INDIA
SOLUTION

32. Dr. NGPASC
COIMBATORE | INDIA
PROBLEM
8. Compute “Income under the head other sources” of Mr. Krishnamurthy who had the following
investments during the previous year 2019-20:
i) ₹ 11,000, 10 % Central Government Securities
ii) ₹ 36,000, 10 % Tax – free commercial securities of a closely held company.
iii) ₹ 6,300, received as interest on Tax free public limited company securities (listed)
iv) ₹ 7,200, received as interest on Karnataka Govt. securities
v) ₹ 4,000, received as interest on debenture of Deepak Fertilizer (listed)
vi) ₹ 30,000, 13.5 % securities of a paper mill co. limited (listed)
vii) ₹ 35,000, 11 % securities of a paper mill co. (listed)
viii) ₹ 10,000, 15 % Jaipur Municipal Corporation Bonds.
ix) Dividend from Carona Ltd ₹ 4,000
x) During the year he also got a prize in Karnataka State Lottery. The amount received by him was
₹ 35,000. Interest on all securities is payable on 1st January every year. Bank charges ₹ 200 as collection
charges

33. Computation of Income from other sources for the P/Y 2019-20
Particulars ₹ ₹
10 % Central Government Securities (11,000 x 10 / 100) 1100
10 % Tax – free commercial securities of a closely held company (36,000 x 10 /100)
Grossing up 3600 x 100 / 100-10
4000
Interest on Tax free public limited company securities (listed) (6300 x 100 / 100-10 ) 7000
Interest on Karnataka Govt. securities 7200
Interest on debenture of Deepak Fertilizer (listed) 4000
13.5 % securities of a paper mill co. limited (listed) (30000 x 13.5/100) 4050
11 % securities of a paper mill co. (listed) (35000 x 11/100) 3850
15 % Jaipur Municipal Corporation Bonds.(10000 x 15/100) 1500
Dividend from Carona Ltd -
Received from Karnataka State Lottery 35000 x 100 / 100-30 50000
Total 82700
Bank Charges 200
Income from other sources 82500Dr. NGPASC
COIMBATORE | INDIA
SOLUTION

34. Dr. NGPASC
COIMBATORE | INDIA
PROBLEM
9. Compute income from other sources for the assessment year 2020-2021.
He received
1. Directors fee from a company - ₹ 10,000
2. Interest on Bank deposits - ₹3,000
3. Income from undisclosed sources - ₹12,000
4. Winning from lotteries received - ₹24,500
5. Royalty on a book written by him – 8,000
6. By giving lectures in functions – 5,000
7. Interest on loan given to a relative – 7,000
8. Interest on tax free debentures of a company (listed in recognized stock exchange) - ₹3,600
9. Dividend on shares - ₹6,400
10. Interest on post office saving bank account - ₹500
11. Interest on government securities - ₹2200
He paid ₹100 for collection of dividend and ₹1000 for typing the manuscript of book written by him.

35. Computation of Income from other sources for the P/Y 2019-20
Particulars ₹ ₹
Directors fee from a company 10,000
Interest on Bank deposits 3,000
Income from undisclosed sources 12,000
Winning from lotteries received (24500*100/70) 35,000
Royalty on a book written by him – typing the manuscript of book written (8,000-1,000) 7,000
By giving lectures in functions 5,000
Interest on loan given to a relative 7,000
Interest on tax free debentures of a company (3600*100/90) 4,000
Dividend on shares -
Interest on post office saving bank account (Exempt upto 3,500) - 500 -
Interest on government securities 2,200
Income from other sources 85,200
Dr. NGPASC
COIMBATORE | INDIA
SOLUTION

36. Dr. NGPASC
COIMBATORE | INDIA
PROBLEM
10. Compute income from other sources for the assessment year 2020-2021.
1. Equity dividends - ₹25,200
2. Preference Dividends - ₹12,000
3. Collection Charges in respect of dividend – 1% of dividend
4. Rent from letting out of a building along with plant & machinery - ₹30,000
5. Depreciation on building - ₹4,000
6. Insurance on Buildings - ₹1,600
7. Office expenses relating to buildings - ₹1,600
8. Repairs, Rates – 1,600

37. Computation of Income from other sources for the P/Y 2019-20
Particulars ₹ ₹
Equity dividends -
Preference Dividends -
Collection Charges in respect of dividend -
Rent from letting out of a building along with plant & machinery 30,000
Less: Depreciation on building 4,000
Insurance on Buildings 1,600
Office expenses relating to buildings 1,600
Repairs, Rates 1,600 21,200
Income from other sources 21,200
Dr. NGPASC
COIMBATORE | INDIA
SOLUTION

38. 38