Presentation on computation of income from other sources for the benefit of taxation students, based on provisions of Income tax Act 1961

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Presentation on
Computation of income from other sources
For
Undergraduate (Commerce) students of Taxation
(Based on Goa University B Com students)
By
Dr. Sanjay P Sawant Dessai
Associate Professor
VVMs Shree Damodar College of Commerce and
Economics Margao Goa

2. UNIT-I C COMPUTATION OF INCOME FROM
OTHER SOURCES
• Sec. 56 Basis of charge
• Sec 57 Permissible Deductions
• Sec 58 Amount not deductible
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3. Introduction
• Any income, profit or gains of the assessee,
which cannot be included in any other heads
of income (salary /House Property/Business or
Profession/ Capital Gains) is chargeable under
the head Income from other source.
• Residuary head of income
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4. Section 56 income chargeable under
other sources
1. Dividends
Deemed dividend under section 2(22) from Indian company or any dividend from
foreign company is taxable in the hands of shareholders.
(Dividend is exempted from tax in the hands of shareholders, since company is
paying tax on divided)
2. Winning from lotteries etc.
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.
3. Employees’ contribution towards staff welfare scheme
Any sum received by the assessee from his employee as contributions to any staff
welfare scheme (provident fund / supperannuation fund) is taxable in the hands
of employer under the head income from other sources if not chargeable under
the head business or profession.
4. Interest on securities/bonds
Interest on debentures, govt. securities /bonds is taxable , if not chargeable under the
head business or profession.
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5. 5. Rental income from machinery, plant or furniture let on hire if
not chargeable under the head business or profession.
6. Sum received under Keyman insurance policy- sum including
bonus received under Keyman Insurance Policy shall be treated as
income chargeable to tax under this head if not taxable as salary
or business income.
7. Gifts- any sum of money or property received without
consideration by an individual or HUF from any person exceeding
Rs. 50,000, the whole of such amount is taxable in the hands of
recipient. (applicable from 1st october 2009)
8. Interest on compensation or enhanced compensation
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6. Deemed dividends
• Under section 2(22) the following payments or distribution by a company
to its shareholders are deemed as dividends to the extent of accumulated
profits
1. Any distribution entailing the release of company assets
2. Any distribution of debentures , debenture stocks , deposit certificates
and bonus to preference shareholders
3. Distribution on liquidation of company
4. Distribution on reduction of capital
5. Any payment by way of loan or advance by closely held company to a
shareholding substantial, interest provided the loan should not have
been made the ordinary course of business
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7. Examples of income under other
sources
• Income from sub-letting
• Interest on bank deposits and loans
• Income from royalty
• Directors fees
• Ground rent
• Agriculture income received outside India
• Directors commission for standing as a guarantor to bankers
• Directors commissions for underwriting shares of new company
• Examination remuneration received by teacher
• Remuneration received by a person from a person other than his employer
• Rent of plot of land
• Insurance commission
• Mining rents and royalties
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8. • Interest on foreign government securities
• Casual income
• Annuity payable under will , contract , trust, deed
• Salary payable to MP
• Family pension received by family member of a deceased employee
• Interest on employees contribution if provident fund is unrecognized
• Income from undisclosed sources
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9. Tax incidence on winning from
lotteries etc.
• Gross winning from lotteries, crossword
puzzles, races including horse races, card
games of any sort or from gambling or betting
of any nature whatsoever are chargeable in
income tax at flat rate of 30 percent
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10. Permissible Deductions allowed under
section 57
1. Commission or remuneration for realising dividend or
interest on securities
2. Deduction in respect of employees contribution towards
staff welfare schemes (if contributing is credited to
employees respective fund before due date)
3. Repairs, depreciation and insurance in case of letting of
plant , machinery and furniture, building etc.
4. Standard deduction in case of family pension (15,000 0r 33
one third percent of such income , whichever is less.)
5. Any other expenses for earning income
6. Standard deduction 50 percent in case of interest on
compensation
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11. Amounts not deductable (58)
• Personal expenses
• Any interest paid outside India on which Tax is
not deducted at source TDS
• Any salary paid outside India without TDS
• Any expenditure or allowance in connection
with income by way of any winning from
lotteries etc.
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