VINOD SIR----98720 46144, 6280627065

Mobile: 98720-46144
THE BES T T UTO RI ALS
132-E, SaheedBhagat Singh Nagar, Pakhowal Road, Ludhiana.
INCOME TAX P.Y. 2022-23 A.Y.2023-24
INCOME FROM OTHER SOURCES
Chapter 11
The last head in the list of heads, this head covers all the incomes
which are not covered under any other head. This head is also known as residuary head.

BASIS OF CHARGE

→ A source of income
→ which does not specially fall under any one of the other four heads of income
→ is to be computed under the head “income from other sources’
In other words, the income which is taxable as per Income Tax Act, but not falling under the
first four heads, will be taxable under this head i.e. Income from Other Source.

Specific incomes Section 56(2)

Specific incomes included under “Income from other sources’

1. Dividends

2. Winnings from lotteries, crossword puzzles, races, card games, gambling or betting of any
form.
3. Income from letting of machinery, plant or furniture along with building and only machinery,
plant or furniture.
4. Interest on securities

5. Salary of M .P., M.L. A. & M .L.C.

6. Agricultural income outside India

7. Bank Interest on Saving Bank Account, Recurring Deposit and Fixed Deposits

8. Interest income on Income T ax Refund

9. Director fees

10. Interest received by employee on his own contribution towards URPF

11. Examination feesreceived by a teacher from a person other than his employer

12. Royalty income, if it is not income from business or profession.

13. Gratuities paid to director who is not an employee of the company

14. Income from undisclosed sources (i.e. unexplained cash credit, unexplained
investm ents, unexplained m oney, unexplained expenditure)
15. Any sum received under a Key m an insurance polic y including bonus (if not taxable under

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the head Salary or Business Income)

16. Interest on deposit made under capital gain deposit scheme1988

17. Clubbing of income

18. Subletting income

19. Family Pension

20. Where any sum of money, the aggregate value of which exceeds 50000 Rs
 Without consideration by an individual or a HUF
 the whole of such sum:
Provided that nothing shall be taxable in case gift received—
a) from any relative; or
b) on the occasion of the marriage of the individual; or
c) under a will of by way of inheritance or
d) in contemplation of death of the payer or
e) from any local authority, trust or university or institution referred u/s 10(23C)
f) Trust/ Institution registered u/s 12AA.
Explanation—For the purposes of this clause, “relative” means—
i) Spouse of the individual
ii) Brother or sister of the individual
iii) Brother or sister of the spouse of the individual
iv) Brother or sister of either of the parents of the individual
v) Any lineal ascendant or descendant of the individual
vi) Any lineal ascendant or descendant of the spouse of the individual
vii) Spouse of the person referred to in clauses (ii) to (vi).
21. W.e.f. 1.10.2009, any sum of money or value of property as defined u/s 56(2)(vii)

22. Refund of Income T ax is not an income and therefore it will not be taxable.

23. Daily allow ance received by M .P., M.L.A. are fully exempted u/s 10(17)

24. Am ount received from LIC are f ully exempted.

25 Advance forfeited on failed negotiation for transfer of capital Assets.

26 Premium on issue of shares by closely held company i.e. private company, in

certain situations

COMPUTATION OF INCOME FROM OTHER SOURCES

For the Assessment year 2023-24
No Particulars Amount
1. Dividend Income
2. Casual Income (winnings from lotteries, crossword puzzles, races including
horse races, card games and other games, gambling, betting etc.)
3. Consideration received in excess of FMV of Shares of a closely held
company, where such shares are issued at a premium
4. Interest received on compensation/enhanced compensation deemed to be

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income in the year of receipt

5. Advance forfeited due to failure of negotiations for transfer of a capital asset
6. Sum of money or property received by any person
7. Compensation or other payment, due to or received by any person, in
connection with termination of his employment or the modification of the terms
and conditions relating thereto
8. The following income, if not chargeable under the head “profits and gains of
business or profession”
 Any sum received by an employer from his employees as contributions
to any provident fund, superannuation fund or any other fund for the
welfare of the employees
 Interest on securities
 Income from letting out on hire of machinery, plant or furniture
 Where letting out of buildings is inseparable from the letting out of
machinery, plant or furniture, the income from such letting.
 Any sum received under a keyman insurance policy including bonus on
such policy (if not chargeable to tax under the head “Salaries” also)
Less Deductions allowable u/s 57
1. In case of dividends or interest on securities
--Any reasonable sum paid by way of commission or remuneration to a banker
or any other person
2. Income consists of recovery from employees as contribution to any PF,
superannuation fund etc.
--Amount of contribution remitted before the due date under the respective
Acts
3. Income from letting on hire of machinery, plant and furniture, with or
without building
--Current repairs to the machinery, plant, furniture or building
--Insurance premium
--depreciation/unabsorbed depreciation
4. Family Pension—33.33% of such income or Rs 15,000, whichever is less.
5. Interest on compensation/enhanced compensation received—50% of such
interest
6. Any other expenditure not in the nature of capital expenditure incurred wholly
and exclusively for earning such income

Income from other Sources

DEDUCTIONS NOT ALLOWABLE U/S 58

1. Any person expenses
2. Interest paid outside India on which tax has not been deducted at source

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3. Any payment chargeable to tax under the head “Salaries”, if it is payable outside India
unless tax has been paid thereon or deducted at source therefrom.
4. 30% of sum payable to a resident on which tax is deductible at source, if such tax has not
been deducted or after deduction has not been paid on or before the due date of return
5. Any expenditure in respect of which a payment is made to a related person, to the extent
the same is considered excessive or unreasonable by the AO, having regard to the FMV
6. Any expenditure in respect of which a payment or aggregate payments exceeding Rs
10,000 is made to a person in a day otherwise than by account payee cheque/bank draft or
ECS through bank account.

TAX ON INCOME FROM OTHER SOURCES

Income Tax rate and conditions
Casual Income @30% of such winning (further increased by surcharge, if applicable)
and health and education cess @ 4%
 No expenditure or allowance can be allowed from such income.
 Deduction u/s 80 is not allowable from such income.
 Adjustment of unexhausted basic exemption limit is also not
permitted against such income.
 Set-off of losses is not permissible against such income.
Unexplained cash @ 60% of such income plus surcharge @ 25% of tax (Effective rate of
credits/investments/money, tax is 78%), including health and education cess @ 4%.
bullion, jewellery etc./  No expenditure is allowable in respect of any expenditure or
expenditure etc. allowance against such income.
 Set off losses is not permissible against such income.
Other Income Normal rates of tax

Taxability of Gifts 56(2)(x)

Question—Discuss the taxability of Gifts received by an assessee.

Answer—
1. Applicability: Individual and HUF
2. Taxability from 1.10.2009: W.e.f. 1.10.2009, the following amounts received by an
Individual or HUF from any person(s) is taxable as Income from Other Sources---
Items of Receipt Taxable Value
a) Any sum of money (gift in cash or by Whole of the aggregate Value
cheque or draft)received without consideration,
and aggregateexceeds Rs 50,000

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b) Immovable property received without Stamp Duty Value(consider each transaction

consideration and Stamp Duty Value of the separately)
property exceeds Rs 50,000
c)Immovable Property received for a The difference between the stamp duty value
consideration less than the Stamp Duty Value and the consideration, if such difference is more
than the higher of Rs 50,000 and 10%of
consideration.
d) Movable property received without Whole of Aggregate Fair Market Value.
consideration, and Fair Market Value exceeds
Rs 50,000 in aggregate (i.e. movable property)
e) Movable property received for inadequate The difference between the aggregate fair
consideration market value and the consideration, if such
difference exceeds Rs 50,000
Summary Table
S Nature of asset Particulars Taxable Value
No.
1 Money Without The whole amount if the same exceeds Rs 50,000
Consideration
2 Movable property Without The aggregate fair market value of the property, if it
Consideration exceeds Rs 50,000
3 Movable property Inadequate The difference between the aggregate fair market
consideration value and the consideration, if such difference
exceeds Rs 50,000.
4 Immovable Property Without The Stamp duty value of the property, if it exceeds Rs
consideration 50,000.
5 Immovable Property Inadequate The difference between the stamp duty value and the
consideration consideration, if such difference is more than the
higher of Rs 50,000 and 10% of consideration.
3 . Applicability of section 56(2)(x)— The provisions of this section 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.
4. Meaning of Specific Terms:
Relative Explain as above
Property means the a) Immovable Property (Land or Building or both)
capital asset of the b) Shares and Securities
assessee (i.e. c) Jewellery
recipient) d) Archaeological Collections
e) Drawings
f) Paintings
g) Sculptures (monument)
h) Any work of Art

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i) Bullion
FMV Fair Market Value of a property other than an Immovable Property
means, the value determined as per the prescribed method.
Stamp Duty Value Stamp Duty Value means the value adopted or assessable by any
authority of the Central/ State Government for the purpose of payment
of Stamp Duty in respect of an immovable Property.

Important Note—Section 56(2)(x) would apply only to property which is in 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. In short, only transfer of a capital asset, without consideration and transfer of a
capital asset, other than immovable property, for inadequate consideration would attract the
provisions of section 56(2)(x).

Valuation Rules
Different properties Valuation of property
1. Immovable property Stamp duty value of the property
2. Jewellery, archaeological  If purchased from registered dealer—If jewellery etc.
collections, drawings, paintings, are received by the way of purchase on the valuation
sculptures or any work of art. date, from a registered dealer (under sales tax), the
invoice value of these properties shall be the FMV.
 In any other case—The price which such jewellery etc.
would fetch if sold in the open market on the valuation
date.
3. Quoted shares and The transaction value as recorded in such stock exchange.
securities (received by way of a
transaction carried through a
recognized stock exchange in
India)
4. Quoted shares and The lowest price of such shares and securities quoted on any
securities (not being received recognized stock exchange in Indiaon the valuation date. If,
by way of a transaction carried however, on the valuation date such shares and securities are
through a recognized stock not traded on any recognized stock exchange, the lowest price of
exchange in India) such shares and securities on a date immediately preceding the
valuation date shall be the FMV.
5. Unquoted equity shares Assets = xxxx
Less: Liabilities = (xxx)
Net worth = xxxx
Value of one share == Net worth X paid up value of share
Total paid up equity capital
6. Other unquoted shares and FMV shall be the estimated price in the open market on the
securities valuation date duly certified by Category I merchant banker or a

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CA.

Note—Immovable property received as capital asset under gift will cover under this section. If
immovable property received as stock in trade for business purpose under gift, then such gift
immovable property will not cover under this section.
Non-applicability of Section 56(2)(x)— This section will not be applicable in the following
circumstances:--
1 From any Relative; or
2 On the occasion of marriage of the individual; or
3 Under a will or by way of inheritance; or
4 In contemplation of death of the payer or donor, as the case may be; or
5 From any local authority; or
6 From any fund or foundation or university or other educational institution or hospital or other
medical institution or any trust or institution; or
7 From any trust or institution registered; or

Question1 (M)—Mr. A, a dealer in shares, received the following without consideration during the
previous year 2022-23 from his friend Mr. B
1) Cash gift of Rs 75,000 on his anniversary, 15.4.2022.
th
2) Bullion, the FMV of which was Rs 60,000, on his birthday, 19 June, 2022
st
3) A plot of land at Faridabad on 1 July, 2022, the stamp value of which is Rs 5,00,000 on that
date. Mr. B had purchased the land in April, 2009.
4) Mr. A purchased from his friend C, who is also a dealer in shares, 1000 shares of X Ltd. @ Rs
th
400 each on 19 June, 2022, the FMV of which was Rs 600 each on that date. Mr. A sold these
rd
shares in the course of his business on 23 June, 2022.
5) Further on 1.11.2022, Mr. A took possession of property (building) booked by him two years
back at Rs20 lakh. The stamp duty value of the property as on 1.11.2022 was Rs 32 lakh and on
the date of booking was Rs 23 lakh. He had paid Rs 1 lakh by cheque as down payment on the
date of booking.
st
On 1 March, 2023, he sold the plot of land at Faridabad for Rs 7 lakh.
Compute the income of Mr. A chargeable under the head Income from other sources and capital
gain for AY 2023-24.

Answer— COMPUTATION OF INCOME FROM OTHER SOURCES OF

Mr. A for the AY 2023-24
S. No Particulars Amount
1) Cash gift is taxable u/s 56(2)(vii), since it exceeds Rs 50,000 75,000
2) Since bullion is included in the definition of property, therefore, when bullion is 60,000
received without consideration, the same is taxable, since the aggregate fair
market value exceeds Rs 50,000
3) Stamp duty value of plot of land at Faridabad, received without consideration, 5,00,000

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is taxable u/s 56(2)(x)

4) Difference of Rs 2 lakh in the value of shares of X Ltd. purchased from Mr. C, NIL
a dealer in shares, is not taxable as it represents the stock in trade of Mr. A

5) Difference between the stamp duty value of Rs 23 lakh on the date of booking 3,00,000
and the actual consideration of Rs 20 lakh paid is taxable u/s 56(2)(x) since
the difference exceeds Rs 1,00,000 being the higher of Rs 50,000 and 5% of
consideration.
Income from Other Sources 9,35,000
Computation of Capital Gains of Mr A for the AY 2023-24
Sale Consideration 7,00,000
Less: Cost of acquisition (deemed to be the stamp value charged to tax u/s
56(2)(x) as per section 49(4) (5,00,000)
STCG 2,00,000

Q 2 (114-E1) X receives the following gifts during the previous year 2022-23:
September 1, 2022 Cash gift of Rs 51000 from a friend on marriage anniversary.
September 30, 2022 Purchase of a house property from a friend for Rs 10,00,000 (stamp duty value is Rs
40,00,000)
December 1, 2022 Purchase of a house property from Mrs. X for Rs 15,00,000 (stamp duty value is Rs
80,00,000)
December 29, 2022 Purchase of a painting from an art gallery (being registered dealer under Maharashtra
GST) for a concessional price of Rs 80,000 (invoice value is Rs 80,000, however, this
painting can be easily Sold for Rs 2,00,000)
March 10, 2023 Cash gift of Rs 40,000 from a colleague.
March 15, 2023 Purchase of a second had car for Rs 2,00,000 (fair market value is Rs 3,50,000)
March 31, 2023 Cash a gift of Rs 30,000 from a non-resident friend.
Find out the amount chargeable to tax under the head “Income from Other Sources’ for the assessment year
2023-24.
Answer—
S. No Particulars Amount
Sept 1 Cash gift from a friend on marriage anniversary 51,000
Sept 30 Difference between SDV and Purchase price is more than Rs 50000 30,00,000
Dec 1 Purchased from relative- not taxable NIL
Dec 29 Purchase from registered dealer—not taxable NIL
Mar10 Cash gift from a colleague 40,000
Mar 15 Purchase a second hand car—not covered NA
Mar 31 Cash gift from a non-resident friend 30,000
31,21,000

Q3(P) Check the taxability of the following gifts received by Mrs Rashmi during the previous year 2019-20 and
compute the taxable income from gifts for the A Y 2023-24.
a) On the occasion of her marriage on 14.8.2022, she has received Rs 90,000 as gift out of which Rs
70,000 is from relatives and balance from friends.
b) On 12.9.2022, she has received gift of Rs 18,000 from cousin of her mother.
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c) A cell phone of Rs 21000 is gifted by her friend on 15.10.2022.

d) She gets gift of Rs 25,000 from elder brother of her husband’s grandmother on 25.10.2022.
e) She has received gift from her friend of Rs12,000 on 14.4.2022.

Answer-
Situation Reason Taxable
amount
Relatives and friends Gift received from relatives or friends on NIL
the occasion of marriage of individuals is
not taxable.
Cousin of Rashmi’s mother Cousin of Rashmi’s mother is not a 18,000
relative. Hence, the cash gift is taxable.
Friend Cell phone is not included in the NIL
definition of property u/s 56(2)(x). Hence
it is not taxable.
Elder brother of husband’s grandfather 25,000
Friend Cash gift received from friend is taxable. 12,000
Total value of gifts 55,000

Q4 (P) Mr. Rahul is employed in a company with Taxable salary income of Rs 5,00,000. He received
a cash gift of Rs 1,00,000 from Atma Charitable Trust (registered u/s 12AA) in December 2022 for
meeting his medical expenses. Is the cash gift so received from the Trust chargeable to tax in the
hands of Mr. Rahul ?
Answer—
COMPUTATION OF TOTAL INCOME OF RAHUL
Particulars Amount
Salary Income 5,00,000
Cash gifts received from Atma charitable Trust (Registered u/s 12AA) (See Note) NIL
Total Income 5,00,000
Note—The amount received as gift from any Trust/Institution registered u/s 12AA is exempt u/s 56.
So the amount of Rs 1,00,000 is exempt from tax.

Forfeiture of Advance money of capital assets due to failure of

negotiations-

If advance money has been forfeited by the seller due to failure of negotiations between buyer and
seller of capital asset, then such forfeited advance money will be treated as income from other
sources. If advance money has been forfeited by the seller before 1.4.2014, then such forfeited
advance money will be deducted from the cost of capital asset or written down value while
computing capital gain at the time of sale of such capital asset.

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It is important to note that such provision is applicable only in that case, when advance money has
been forfeited due to failure of negotiations of CAPITAL ASSET. If advance money has been
forfeited other than capital asset then such provision will not apply.

e.g. X receives Rs 2,00,000 as advance money in the course of negotiations for transfer of rural
agricultural land situated in India. Agricultural land is not transferred and advance money is forfeited
by X. In this case, section 56(2)(ix) is not applicable as rural agricultural land in India is not a
“Capital Asset” u/s 2(14). Therefore, Rs 2,00,000 is not chargeable to tax at all..

Q 5 (SM 6) Discuss the taxability or otherwise in the hands of the recipients, as per the provisions of
the Income tax Act, 1961.
a) Mr. A received an advance of Rs 50,000 on 1.9.2022 against the sale of his house.
However, due to non-payment of instalment in time, the contract has cancelled and the
amount of the amount of Rs 50,000 was forfeited.
b) Mr. N, a member of his father’s HUF, transferred a house property to the HUF without
consideration. The value of the house is Rs 10 lakhs as per the Registrar of Stamp Duty.
c) Mr. Kumar gifted a car to his sister’s son (Sunil) for achieving good marks in CA Final exam.
The fair market value of the car is Rs 5,00,000.
Answer—
S Taxable/Not Reason
No Taxable
a) Taxable Advance money forfeited on or after 1.4.2014 will be taxable under the
head income from other source.
b) Not Taxable U/s 56(2)(x), immovable property received without consideration by a HUF
from its relative is not taxable. Mr N is a member of his father’s HUF, he is
relative of the HUF, he is the relative of the HUF.
c) Not Taxable Car is not covered under the definition of property u/s 56(2)(x)

Q 6 (114.1P1) X receives the following gifts during the previous year 2022-23.
1. On the occasion of marriage of X, he gets Rs 2,90,000 as gift on 2.4.2022 (out of which Rs
2,00,000 is received from friends of X and Mrs. X and remaining amount is received from
close relatives of X and Mrs X).
2. On June 22, 2022, he gets a gift of Rs 23,000 from C, who is cousin of his father.
3. On August 18,2022, he gets a gift of Rs 15,000 from D, who is elder brother of his
grandfather.
4. On September 20, 2022, he gets a gift of Rs 7,00,000 from his grandmother.
5. A computer received from his employer (it was purchased for Rs 65,000 by the employer on
May 1, 2022 and given as gift to X on October 20, 2022).
6. On November 2, 2022, X purchases a house property from his friend D for Rs 65,000 (stamp
duty value of the property is Rs 10,00,000).

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7. On November 30,2022 X gets a gift of a plot of land from his grandfather (stamp duty value is
Rs 15,00,000)
8. On December 30, 2022, X gets by gift a commercial flat from the elder brother of his father-
in-law (stamp duty value is Rs 25,00,000).
9. On Jan 6, 2023 he gets a gift of Rs 2,00,000 (cash gift of Rs 25,000 and gift of a work of art
whose market value is Rs 1,75,000) from a notified public charitable institution.
10. X receives on Jan 11, 2023 a house property under will of a person known to him. The stamp
duty value is Rs 15,40,000.
11. On Jan 20, 2023, he gets a wrist watch by gift (fair market value: Rs 40,000) from his friend
B.
12. On Jan 25, 2023, he purchases a work of art for Rs 16,00,000 from an exhibition in New York
(the fair market value of the work of art on the date of purchase is Rs 17,00,000).
13. On February 1, 2023, he purchases a commercial property for Rs 16,00,000 (stamp duty
value is Rs16,75,000).
14. On February 5, 2023, he gets a birthday gift of a gold chain (fair market value: Rs 11,000)
from his friend.
15. On February 10, 2023, X gets by way of gift a plot of land in Pune from a partnership firm.
The partnership firm has only two partners—father of X and Mrs X. The stamp duty value of
the plot of land is Rs 19,00,000.
16. On February 16, 2023, X purchases 500 shares in Tata Chemicals from his friend D at Rs 90
per share (outside stock exchange). The lowest market quotation in the Bombay Stock
Exchange and the National Stock Exchange on the date of purchase is Rs 300 and Rs 310
respectively.
17. On March 1, 2023, X gets a gift of gold ring from a cousin of his mother-in-law. The fair
market value is Rs 20,000.
18. On March 20, 2023, X gets a painting by way of gift from C Ltd. Mrs. X holds 70% shares in
C Ltd. The fair market value of painting is Rs 19000.
19. On March 25, 2023, X gets a small plot of land by way of gift from a cousin of Mrs X (Stamp
duty value is Rs 44,000)
20. On March 31, 2023, X receives a shop (situated in Jammu) by way of gift from a friend
(stamp duty value is Rs 50,000).
Compute the amount chargeable to tax in the hands of X under the hand “Income from other
Sources” for the assessment year 2023-24.
Answer—
Cash gift Gift of Gift of Purchase of Purchase of
immovable movable movable for immovable
property property inadequate property for
consideration inadequate
consideration
1 Gift on occasion of marriage Nil - - - -
of X (not taxable)
2 Cash gift from C 23000
3 Cash gift from D (elder 15000
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brother of grandfather is not

relative)
4 Cash gift from grandmother Nil
(gift from relative is not
taxable)
5 Gift from employer (it is - - - - -
taxable under the head
salary)
6 Pur of immovable property -- -- -- -- 9,35,000
for inadequate consideration
7 Gift of immovable property - NIL -- -- --
from grandfather (gift from
relative is not taxable)
8 Gift of commercial property -- 25,00,000 -- -- --
(elder brother of father-in-law
is not relative)
9 Gift from notified public NIL -- NIL -- --
charitable institute (not
taxable)
10 Gift under will (not taxable - Nil - - -
even if received from a non-
relative)
11 Gift of a wrist watch (wrist -- -- -- -- --
watch is not property for the
purpose of section 56(2)(x)
and not taxable)
12 Purchase of a work of art for -- -- -- 1,00,000 --
inadequate consideration
13 Pur of immovable property -- -- -- -- --
for inadequate consideration
(as the difference between
purchase price and stamp
duty value exceed Rs 50,000
but SDV does not exceed
105% of purchase price,
nothing is chargeable to tax)
14 Gift of a gold chain -- -- 11,000 -- --
15 Gift from a partnership firm -- 19,00,000 -- -- --
(partnership firm is not
relative even if relatives of X
are partners)
16 Pur of shares for inadequate -- -- -- 1,05,000 --
consideration (Rs 300-
90=210x500)
17 Gift of gold ring (cousin of -- -- 20,000 -- --
mother-in-law is not relative

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of X)
18 Gift from a company -- -- 19,000 -- --
(company is not a “relative”
even if Mrs X is a major
shareholder)
19 Gift of plot of land (not -- NIL -- -- --
taxable as SDV does not
exceed of Rs 50,000)
20 Gift of shop (not taxable as -- NIL -- -- --
stamp duty value does not
exceed Rs 50,000)
Total 36,000 44,00,000 50,000 2,05,000 9,35,000

Statement showing Amount of Gift Taxable under the head Income from Other Sources
Cash gift (not taxable as the aggregate amount of cash gift does not exceed Rs 50,000) Nil
Gift of immovable properties 44,00,000
Gift of movable properties (not taxable as the aggregate amount does not exceed Rs Nil
50,000)
Purchase of immoveable property for inadequate consideration 9,35,000
Purchase of movable property for inadequate consideration 2,05,000
Amount taxable 55,40,000

BASIS OF CHARGE OF DIVIDEND

Any income by way of dividends received from a company, whether domestic or foreign, is taxable in
the hands of shareholder at normal rate of tax. However, dividend distributed by a domestic
company before 1.4.2020 and received by shareholders on or after 1.4.2020 and on which tax u/s
115-O, if applicable, has been paid would be exempt in the hands of the shareholders.

Family Pension

Question—Discuss the taxability of Family Pension.

Answer—
1. Meaning Family Pension means pension received by the family members of the
deceased employee.
2. Taxability Family Pension is chargeable to tax under the head “Income from Other
Source”
3. Deduction u/s 57 Least of the following is allowed as a deduction---
a) 33.33% of Gross Pension, or b) Rs 15,000
4. Exemptions Exemption available u/s 10(18) and 10(19)

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Q 9 (P)- Mr. Shakti Kapoor, a Government Servant, died on 11.5.2015 whilst still being in service. In
terms of the rules governing his service, his widow Mrs M, is paid a Family Pension of Rs 2950
p.m. and Dearness Allowance of 30% thereof. For the Assessment Year 2023-24, is Mrs. Shakti
Kapoor assessable on the receipt and if so, under what head of income?

Answer—Family pension received by Mrs. Shakti is chargeable under the head Income from Other
rd
Sources. She can claim the lower of Rs 15,000 or 1/3 of her Family Pension, as deduction u/s
57 in respect of such income.
Particulars Rs. Rs.

Family Pension Received (2950x12) 35400

Dearness Allowance (Rs 35400 x 30%) 10620
Total Pension Received 46,020
Less: Deduction u/s 57—Least of the following
33.33% of Gross Pension (46020 x 33.33%) 15,340
Maximum Deduction 15,000 (15,000)
Taxable Family Pension 31,020

Winning from lotteries etc.

Winning from lotteries, crossword puzzles, races including horse races, card games, gambling or
betting of any sort.

Lottery includes winnings from prizes awarded to any person by draw of lots or by chance or in any
other manner under any scheme by whatever name called and includes any game show,
entertainment programme on TV or electronic mode in which people complete to win prizes or any
other similar game.

Formula for Grossing up==Net Amount Received X 100

100—Rate of Tax
No deduction of any expenditure or exemption is allowed from such income. Also no deduction
under Chapter VI-A (i.e. deduction u/s 80)shall be allowed.

No Grossing up is required in case of other races, gambling or betting .

Unsold Tickets with Agent:- Income accruing to an agent/trader in respect of prizes on unsold /
unclaimed lottery tickets in possession of an agent is income from business and does not
constitute winnings from lotteries.
Where an assessee does not maintain any books of account:-Lottery Prize won by him would

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accrue in the year in which it is received by the assessee, and not in the year in which the prize is
declared.

Q10(KP)– Mr. G Bedi owns horses at Bombay and Bangalore. These horses run for races at the
race course. During the year 2022-23 Mr. Bedi submits the following information:
1) Expenses on race horses at Bombay 2,60,000
2) Expenses on race horses at Bangalore 4,30,000
3) Sake money earned by horses at
a) Bombay 1,20,000
b) Bangalore 5,00,000
4) Mr. Bedi received Rs 1,05,000 on 1.7.2022 on betting during horse races at Bombay. Compute
his Taxable income under the other sources.
Answer—
Activity of maintenance of race horses:
Income at Bombay 1,20,000
Income at Bangalore 5,00,000
6,20,000
Less: Expenses at Bombay (2,60,000)
Expenses at Bangalore (4,30,000)
Loss from activity of maintenance of race horses to be c/f 70,000
Race Winning
Amount received 1,05,000
Gross (1,05,000 X 100/70) 1,50,000 150000
Income from Other Sources 150000

Computation of tax Section 115BB

Tax rate shall be @ 30% on winning from lotteries or crossword puzzle or card games or other
games.

The payer of lottery shall deduct TDS at the rate mentioned above only if the amount of lottery,
cross word puzzles, horse races exceeds Rs 10,000 .

Rate of TDS for interest

1. Securities listed on a recognized stock exchange --10%

2. Unlisted securities ---10%
However no TDS shall be deducted on any security of central/state govt. Full interest is paid to

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assessee without any deduction of tax.

No TDS has been deducted by Co-operative society and Post Offices.
No Grossing up---Tax free Govt. Securities, Less Tax Govt. Securities
Tax Free commercial securities are always to be grossed up whether interest rate is given or
interest received is given.
Less Tax Commercial securities—If rate of interest is given, then no need of grossing up. If
amount of interest received is given then always to be grossed up.
Rate of TDS on Bank FD Interest---If amount of interest exceeds Rs 10,000 (Rs 50000 if recipient
is senior citizen), then TDS rate is 10%
Rate of TDS on interest other than interest on securities —No TDS will be deducted if the
amount of interest does not exceed Rs 5000. If amount of interest exceeds Rs 5000, then rate of
TDS will be 10%.

No Deduction of TDS in case of Interest on Debentures—The TDS will not be deducted by the
company on debenture interest if the following conditions are satisfied:--
1 Debentures are issued by public limited company.
2 Interest is paid to a Resident debenture holder only (i.e. ROR and NOR).
3 Debentures are listed in a recognized stock exchange. In other words, TDS must be
deducted on unlisted debentures.
4 Interest must be paid by the company in account payee cheque or other internet modes like
ECS or NEFT etc. In other words, it must not be paid in cash or bearer cheque.
5 Amount of interest must not be exceeding Rs 5000 in a financial year. In other words, if
amount of interest exceeds Rs 5000 then TDS must be deducted @ 10%.

. Deduction on Interest received on compensation or

enhanced compensation u/s 57(iv)

When interest income is received on compensation or enhanced compensation under compulsory

acquisition by Govt., then such interest income shall be taxable in the year of receipt under this
head. The assessee can get the benefit of deduction @ 50% of such interest. In this case, no
further deduction is allowed from such interest income

Q11(8.5) – Rohit Ahuja whose property was compulsorily acquired in 2005 received enhanced
compensation of Rs 9,00,000 on 15.11.2022 which includes Rs 2,40,000 as interest on such
enhanced compensation. Discuss the taxability of such compensation.

Answer—Enhanced compensation of Rs 9,00,000—2,40,000 = 6,60,000 shall be taxable under the

head capital gain. W hereas interest on enhanced compensation shall be taxable under the head
income from other sources as under:

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Interest on enhanced compensation received Rs 2,40,000

Less: Deduction @ 50% (1,20,000)
Taxable interest 1,20,000

Q 13(SM 7) Interest on enhanced compensation received by Mr. Hitesh during the previous year
2022-23 is Rs 5,00,000. Out of this interest, Rs 1,50,000 relates to the previous year 2019-20, Rs
1,65,000 relates to the previous year 2020-21 and Rs 1,85,000 relates to previous year 2022-23.
Calculate interest income for the previous year 2022-23.
Answer—The entire interest of Rs 5,00,000 would be taxable in the year of receipt.
Particulars Amount
Interest on enhanced compensation 5,00,000
Less: Deduction u/s 57(iv) @ 50% (2,50,000)
Interest chargeable under the head “Income from Other Sources” 2,50,000

Interest exempt from tax Section 10(15)

Interest on following notified bonds/certificates is exempt:-
1. National defence gold bonds, 1980
2. National plan savings scheme (NSS), National Plan Certificates
3. Special bearer bonds, 1991
4. P.O. saving bank account(Rs 3500 in case of individual a/c and Rs 7000 in case of joint
a/c)
5. Interest on notified relief bond
6. Capital investment bonds
7. Interest on notified bonds/debentures of public sector company or local authority
8. P.O. Cash certificates (5 Years)
9. Interest on Public Provident Fund is also exempt section 10(11).
10. P.O. Cumulative Time Deposit Account (15Years)

No deduction Section 14A

 For computing the total income under the five heads

 no deduction shall be allowed
 in respect of expenditure incurred by the assessee
 in relation to income which is exempt.

Bond Washing Transactions

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These are the illegal transactions made primly to evade the tax liability. In this case, a
person with a very high income will transfer securities to other person w ith low income
just before the due date and get back these securities just after the due date. In this way, t he
person with ver y high incom e will not remain the owner of the securities on the due date of
interest and hence he will not be liable to pay income tax on such amount of interest. Because
income tax will be charged to that person who is the owner of the security on the due date of
interest. If it comes to the notice of income tax officer, then he will not be perm itted such
transactions and it will be deem ed to the income of the transferor and not the transf eree.
However, these provisions are not applicable if the owner proves that there has been no
avoidance of Income Tax.
In other words, If owner of any security sells it just before due date and
again acquires them after due date, he will be able to avoid payment of tax on interest.
In such case as per section 94 interest would be deemed to be the income of transferor and not
transferee.
However it is not applicable if
I. there is no avoidance of tax or
II. avoidance of tax is not systematic i.e. there was no avoidance of income tax by such a
transaction in any of the three preceding years.

Q14(PCC M 07) Mrs X, an American national, got married to Mr. Y of India in USA on March 2, 2022
and came to India for the first time on March 16,2022. She remained in India up till September
19, 2022 and left for USA on September 20, 2022. She returned to India again on March 27,2023.
While in India, she had purchased a show room in Mumbai on April 22,2022, which was leased out
to a company on a rent of Rs 25,000 per month from May 1,2022. She had taken loan a bank for
purchase of this show room on which bank had charged interest of Rs 97,500 upto March 31,2023.
She had received the following gifts from her relatives and friends during 1.4.2022 to 30.6.2023
 From parents of husband 51,000
 From married sister of husband 11,000
 From two very close friends of her husband, Rs 151000 and Rs 21,000
Determine her residential status and compute the total income chargeable to tax along with the
amount of tax payable on such income for the assessment year 2023-24.

Answer—Mrs X is non-resident in India for the assessment year 2023-24 (she is in India for 177
days during the previous year 2022-23 and 16 days during earlier 4 years.)

COMPUTATION OF TOTAL INCOME OF MISS X

For the assessment year 2023-24
Income from House Property
Gross annual Value 275000
Less: Municipal taxes paid by landlord (-------)
Net annual value

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Less: Deduction u/s 24

Standard Deduction @ 30% of NAV (82,500)
Interest on Loan (97,500)
House property income 95,000 95,000
Income from Other Sources
Gift from parents of husband NIL
Gift from married sister of husband NIL
Gifts from two very close friends of her husband 1,72,000 1,72,000
Gross Total Income 2,67,000
Less: Deduction u/s 80 (NIL)
Total Income 2,67,000

Note—
Gifts from relatives are fully exempted. In this question gift from parents of husband and sister of
husband are covered under the definition of relatives. Therefore, gifts from parents and sister of
husband are not taxable in the hands of Mrs. X. But gift from friends in excess of Rs 50,000during
the previous year as whole, will be taxable as whole in the hands of the assessee.

Q Write a short note on amount received from LIC u/s 10(10D)

Answer—
1 Applicability All Individuals
2 Exemption Any sum received under life insurance policy, including sum allocated by way
of Bonus, is fully exempt except the following—
a) Any sum received from policy u/s 80DD(3) or u/s 80DDA(3)
b) Any sum received under Keyman Insurance Policy, or
c) Any sum received under Insurance policies issued between 1.4.2013
and 31.3.2012, if premium payable or paid during any of the years
during the term of the policy exceeds 20% of the actual capital sum
assured,
d) Any sum received under an Insurance Policy, issued on or after
1.4.2012, the premium payable for any of the years during the policy
exceeds 10% of the Actual capital sum assured
3 Actual Capital a) Actual capital sum assured means the minimum amount assured under
Sum the policy, on the happening of the insured event, at any time during
the term of policy,
b) Actual capital sum assured does not take into account—
 Value of premiums agreed to be returned
 Bonus and/ or other benefits over and above the sum actually
assured.
4 Special points a) Exempt in Death cases:-Items (c) and (d) of Point 2 above does not
apply to any sum received on the Death of a person. So, any sum

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received under LIC Policy on death of the person is fully exempt.

b) Additional Limit:- The limit of 10% shall be taken as 15% for policy
issued or an after 1.4.2013, for insurance on life of the following
persons—
 Person with disability/ severe disability as referred in sec 80U
 Person suffering from disease or ailment specified in Rules
made u/s 80DDB.

Q 15(8.15P) Determine the taxability of the following sums received by Mr. A

from LIC on account of the Life Insurance Policies taken by him—
S. Date of issue Person Insured Actual Capital Annual Sum received
No of policy sum assured Insurance as Bonus
Premium during the PY
2020-21
1 20.10.2010 Minor Son 5,00,000 75,000 60,000
2 10.06.2012 Spouse 2,00,000 30,000 15,000
3 11.04.2014 Handicapped Daughter 8,00,000 1,00,000 18,000
(Sec 80U disability)
Answer—
S No Date of Issue Bonus during Taxability
PY 2020-21
1 20.10.2010 60,000 Exempt u/s 10(10D), as the policy is issued on or
before 31.3.2012 and the Annual Premium does not
exceed 20% of the Actual capital sum assured
2 10.6.2012 15000 Sum received is taxable, as the policy is issued
after 1.4.2012, and the annual premium exceeds
10% of the Actual Capital Sum Assured.
3 11.4.2013 18000 Sum received is exempt u/s 10(10D), as the policy
is issued after 1.4.2013 for insuring the life of the
handicapped daughter, being a person with sec 80U
disability, and the Annual Premium does not exceed
15% of the Actual Capital Sum Assured.

Questions for Practice

Q16(119-EI) X, a resident and ordinarily resident in India, gives the following particulars of his
income and expenditure f or the previous year ending 31-3-2021:
Rent of a house situated in Delhi Rs 30,000; rent f rom letting a building (in Bom bay) along
with plant and m achinery (letting out of building cannot be separated from letting out of plant
and m achinery): Rs 60,000; depreciation of building in Bom bay: Rs 3,000; depreciation of

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building in Delhi: Rs 2,000; repairs and insurance of building (in Bom bay) and plant and
machinery: Rs 6000.
Dividend on preference shares from an Indian Company declared on August 3, 2020:Rs 9000.
Loan from another Indian company which is deemed as dividend u/s 2(22)(e) is given on
April 3, 2020 (amount received Rs 18000)
Royalt y incom e Rs 7000. W inning from camel races on September 25, 2020 (net am ount
received Rs 13000, tax deducted at source : Nil). Interest on 6.5 % (tax free) National relief
Bonds: Rs 42,000.
Gift received on Januar y 20,2021 in foreign currenc y from a school friend: Rs 1,80,000. Gift
from another friend on March 31,2021 Rs 20,000.
Determine the income chargeable under the head “income from other sources” f or the
assessment year 2021-22.
An swe r—

Re ntal inc ome bui lding in Bomba y (composite)

Com pos ite Rent 60, 000
Less: Depreciation of buildin g in Bombay 3,0 00
Re pairs and ins uranc e of b uilding 6,000 9,0 00 51, 000
Divide nd on p reference sh ares f rom an I ndian co mpany 900 0
De eme d dividend (1800 0) 180 00
Ro yalty Inc ome 7,0 00
W innin g from came l rac es 13, 000
Int erest on natio nal relief bonds Exe mpt
Gift fro m frien ds (1,80, 000 +2 0,000) 2,0 0,000
Incom e from o ther sources 2 98000

Q17 (119-E2) Mrs X (age:42 years) holds the following securities on April 1, 2020:
Rs 20,000 10% (non-listed) debentures of ABC Ltd.(date of paym ent of interest: June 1 and
December 1 ever y year)
Rs 1,70,000 10%Central Govt. securities (date of paym ent of interest: February 28 every year)
Rs 1,30,000 11% debentures of PQR Ltd. (dates of paym ent of interest: March 1 and
Septem ber 1 every year)
On October 31, 2020, Mrs. X sells Rs 1,30,000 11% debentures of PQR Ltd. Determine the
taxable income and tax liability of Mrs. X for the assessment year 2021-22 on the assumption
that her salary income is Rs 11,83,860 (af ter standard deduction) and she contributes Rs
1,32,270 towards unrecognized provident f und. Mrs. X gets a gift of Rs 1.50 lak h from her
husband on March 31,2021.Ignore section 115BAC pertaining to alternative tax regime.
An swe r--
Co mputation of Total I ncome of M rs X
F or the Assessm ent yea r 20 21 -22
Partic ula rs De tails Am ou nt
Salary Inc ome 118386 0
Int erest on debentures of ABC Lt d. 200 0
Int erest on Centra l Go vt Securities 170 00

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Int erest on debentures of PQR Ltd. (13000 0 X1 1%X6/12) 715 0

261 50
Gift fro m husband exempt 261 50
GTI 121 0010
Less: Deduc tion u/s 8 0 NI L
12, 10,010
Co mp utatio n of T ax Liabil it y
Up toRs 250000 NI L
Rs 25000 1 to 5000 00 @ 5 % 12, 500
Rs 50000 1 to 1000 000@ 2 0% 1,0 0,000
10, 00,000 to 12 10010 @ 30% 63, 003
1,7 5,503
Add: Cess @4% of 1,75,50 3 7,0 20
Total Tax liabi lit y 1,8 2,523 or
1,8 2,520

Q 18(119-P2) X holds the following securities on April 1, 2022

Rs 10,00,000 5% UP Govt. Loan (date of payment of interest: January 1)
Rs 40,000 6% Non-listed debentures of ABC Ltd. (date of paym ent of interest: June 11 and
December 11 ever y year)
Rs 25,000 8% Debentures of PQR Ltd. (date of paym ent of interest: June 15 and Decem ber
15 every year)
On December 1, 2022, X sells Rs 25000 8% debentures of PQR Ltd. Calculate the taxable
income of X for the assessment year 2023-24. His business income is Rs 5,64,000. Post office
Saving Bank Interest is Rs 4300. SBI saving bank interest is Rs 9500 and he has received a
gift of Rs 1,00,000 in foreign currenc y from a f riend on Decem ber 1, 2022 on his m arriage
anniversary.
An swe r—
Co mputation of Total I ncome of M rs X
F or the Assessm ent yea r 20 23 -24
Partic ula rs De tails Am ou nt
Bus ine ss Inc ome 5,64, 000
Income f rom Other Source
Int erest on UP Go vt. Loan 50, 000
Int erest on Non-lis ted Deben tures 240 0
Int erest on Debentures of PQR Ltd 1,0 00
Pos t Office Saving Bank (4 300—3500) 800
SBI Savin g bank Inte res t 950 0
Gift In fo reign currenc y from a friend 1,0 0,000 1,6 3,700
GTI 7,27,700
Less: Deduction u/s 80 TTA (i.e. Savin g account interest: Post office: 10, 000
Rs 800+SBI Rs 950 0, subject to a ma ximum of Rs 1 0, 000)
Total Inc om e 7,17,700

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Q 19 (119-E3) X, maintaining books of account on the basis of f inancial year, holds the
following securities on April 1, 2022:
Rs 60,000, 7% MP Govt Loan (date of paym ent of interest: July 15 every year).
Rs 30,000, 11% debentures (non-listed) of ABC Ltd. (date of payment of interest: June 30
every year).
Apart from the aforesaid securities, X invests in UP Govt. Loan, Central Govt. Securities and
(listed) debentures of PQR Ltd. and receives on December 1, 2022, Rs 3000, Rs 9000 and Rs
2700 (net of tax deducted-rate of tax 10%), respectively, as interest. His business income is
Rs 11,86,000. He pays Rs 200 as commission to his bank for collecting interest on securities.
Determine the taxable income of X for the assessment year 2023-24.
An swe r—
Co mputation of Total I ncome of M r X
F or the Assessm ent yea r 20 23 -24
Partic ula rs De tails Am ou nt
Bus ine ss Inc ome 11,86 ,000
Incom e from Other Sourc es
Int erest on MP Govt. Loan (60 000 X7%) 420 0
Int erest on Debentures of ABC Lt d. (300 00 X11%) 330 0
Int erest on UP Go vt. Loan 300 0
Int erest on Centra l Go vt. Securities 900 0
Int erest on Debentures of PQR Ltd. (2700 X100 /90) 300 0
225 00
Less: Colle ction Charges (200) 223 00
GTI/ TI 12,08 ,300

Q 20(119 P3) X holds the following securities on April 1, 2022:

Rs 10,000 6.5% Central Govt. Loan (date of payment of interest: July 10 every year)
Rs 40,000 8% debentures (non-listed) of PQR Ltd. (date of paym ent of interest: May 15 and
Nov 15 every year).
Rs 10,000 9% Relief Bonds (T ax free)
Apart f rom the aforesaid securities, X invests in (non-listed) UP Govt. Loan, Bihar Govt. Loan
and debentures of ABC Ltd. (non-listed) on June 30,2022 and receives Rs 4000, Rs 8000 and
Rs 18,000 respectively, as interest on December 31, 2022. His rental (taxable) incom e is Rs
11,52,000. He pays 2% commission to bank for collecting interest (net) on securities.
Determine the taxable income of X for the assessment year 2023-24.
Answ er—
COM PUT AT ION OF TOT AL INCOM E OF X
FOR THE ASSESSM ENT YEAR 2023-24
Amt received in Amount
cash T axable
Securities of the Central Govt (i.e. 10,000 X 6.5%) 650 650
Debentures of PQR Ltd (i.e Rs 40,000 X 8%) 2880 3200
UP Govt. Securities 4000 4000

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Bihar Government Loan 8000 8000

Debentures of ABC Ltd. (gross amount =18000 X 100/90) 18000 20000
Total 33530 35850
Less: Bank Charges @ 2% of Rs 33530 671
Income from Other Sources 35179
Business Income 1152000
Gross Total Income 1187179
Less: Deduction NIL
Total Income 1187180
Note—Interest on (tax-free) National Relief Bonds is exempt from tax u/s 10(15).

Q21 (119 P8) X (32 years) is resident in India. Find out the Total income for the information
given below for the assessment year 2023-24:
W inning from races Rs 10,000 (expenditure incurred Rs 200); short term capital gain
(securities transaction tax is applicable); Rs 3,65,000, bank interest (fixed deposit) Rs
2,31,000, public provident f und contribution Rs 1,14,000.
Answ er— TI 4,92,000

Q22(119 P9) Mrs X (27 years) is resident in India. Find out the net income for the information
given below for the assessment year 2023-24:
W inning from lottery: Rs 35,000 (expenditure incurred Rs 500), Long term capital gain (on
transfer of gold); Rs 2,25,000, salary incom e (af ter standard deduction): Rs 2,90,000, interest
on debentures Rs 82,000, public provident f und contribution Rs 1,50,000.
Answ er—Total Income Rs 4,82,000: GTI 6,32,000 Net Income Rs 4,82,000

Q23 (KP3) Calculate income f rom other sources from information given below:
a) W inning from Lottery Rs 1,00,000
b) Am ount received from race winnings Rs 35,000
c) Rs 20,000 as gift from his friend
d) Rs 1,00,000 as gift f rom his elder brother
e) Rs 1,40,000 as gift on his marriage
f) Rs 25,000 as gift from grand-f ather.
g) Rs 80,000 as gift from his NRI friend on 1.1.2023
h) Another gift of Rs 18000 received from his cousin

An swe r—
Co mputation of Incom e from Other Sources of
For th e assessment ye ar 20 23-24
a) W inning from lottery 1,00,000
b) Am ount received from race winnings (35,000 X100/70) 50,000
Gifts received

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c) Gif t from his friend 20,000

d) Gif t from his elder brother (relative) Exempted
e) Gif t on his marriage Exempted
f) Gif t from grandf ather Exempted
g) Gif t from his cousin 18,000
h) Gif t from his NRI friend on 1.1.2023 80,000 1,18,000
Income from Other Sources 2,68,000

Q24 (KPS 47) From the following particulars for the year ended 31.3.2023, compute the
income of Surya Bhaskaram, under the head “ Income from other Sources”.
Dividend from cooperative society 24,000
Dividends from an Indian Com pany 12,000
Dividend collection charges @ 1%
Rent f rom buildings and Machinery 30,000
Depreciation on buildings 4,000
Insurance on buildings 1,600
An swe r—60040

Q 25(KPS 48) T he f ollowing investm ents are held by Mr. Raoon 1.4.2022:
a) Rs 40,000 10% UP Govt. Loan
b) Rs 35,000 8% Debentures of a Sugar Mill
c) Rs 50,000, 12% Debentures of Vazir Trading com pany.
On 1.9.2022 he sold the sugar m ill debentures-cum-interest and purchased Rs 50,000, 14%
debentures-cum-interest of Beauty T rading Co. Interest and dividend is received yearly on
st
1 January. Com pute income from other sources for the year ending 31.3.2023. Bank
charged commission @ 2% of interest.
An swe r—16,660

Q 26 (KP 15) An assessee had the following investments as on 1.4.2022:

a) Rs 40,000, 12% Central Govt. Loan.
b) Rs 30,000, 10% Govt. Securities.
c) Rs 20,000, 9% Pref erence shares of paper mill company
d) Rs 50,000, 11% Bom bay Port Trust Bonds;
e) Rs 20,000, 15% debentures of a limited Company (unlisted)
f) Rs 10,000, 10% securities issued by Govt. of England.
g) 10,000, 9% National Relief Bonds
h) Rs 20,000, 14% Municipal Debentures;
i) Interest accrued on NSC VIII issue purchased on 11.3.2023 Rs 1130.
j) Rs 18,000, 10% Tax free Debentures of a limited company (unlisted)
st
On 1 September, 2022 he bought Rs 50,000; 12% Maharashtra Govt. Bonds for Rs 60,000
th st
the interest on which is payable on 30 June and 31 December. For this purpose he took

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a loan from his bankers for Rs 40,000 @ 15% p.a. and the balance of Rs 20,000 were
financed out of a previous loan taken f or the purchase of a motor car @ 9%.
Bank charged 2% of interest and dividend as collection charges and 3% commission on
purchase of securities.
Calculate the income from other sources.
An swe r—
Comp utation of I ncome from Other Sources o f
For the ass essmen t yea r 2023-24
Interest on Securities:
a) Interest on 12% Central Govt. Loan (40,000 X12%) 4,800
b) Interest on 10% Govt. Securities (30,000X10%) 3,000
c) Interest on Bombay Port T rust Bonds (50,000 X11%) 5,500
d) Interest on Debentures of a company (20,000 X15%) 3,000
e) Interest on Municipal Debentures (20,000 X14%) 2,800
f) Int. on T ax free debentures of a com pany (unlisted) (1800X100/90) 2,000
g) Interest on Maharashtra Govt. Bonds (Half yearly) 3,000
h) Interest accrued on NSC VIII issue 1,130
i) Interest on Securities issued by a Foreign Govt. (10,000X10%) 1,000
Dividend
Dividend on Pref erence shares of Paper Mill 1800
28030
Less: Deductions u/s 57
Collection charges (28030—1130=26900 x 2%) 538
Interest on Borrowed Money (40,000 X15% X7/12) 3500 4038
Income from Other Sources 23992

st
Q 27 (SM Q7) From the following particulars of Krish f or the previous year ended 31 March,
2023, compute the income chargeable under the head “Income f rom Other Sources”.
S No Particulars Amount
1 Director f ees from the company 10,000
2 Interest on bank deposits 3,000
3 Income from undisclosed sources 12,000
4 W inning from lotteries (Net) 35,000
5. Royalt y on a book written by him 9,000
6. Lecturers in Sem inars 5,000
7. Interest on loan given to relative 7,000
8. Interest on debentures of a company (listed in a recognized stock exchange) 3,600
net of taxes
9. Interest on Post office Saving Account 5,00
10. Interest on Govt. Securities 2,200
11. Interest on Monthly Incom e Scheme of Post Off ice 33,000
He paid Rs 1000 for typing the m anuscript of book s written by him .
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An swe r—
COMPUT ATI ON OF INCOM E FROM OTHER SOURCES OF Krish
Partic ula rs Rs Rs
1 Directo r fe es from th e c om pany 10, 000
2 Int erest on bank d eposits 3,000
3 Income f rom undisc los ed sou rces(taxable @ 60% plus surcharge @25%) 12,000
4 W innin g from lo tteries (taxab le @30% )(35,000 X100 /70) 50,000
5 Ro yalty on a bo ok written by him 9,0 00
Less : Exp ens es (1000) 8,0 00
6 Lecturers in Seminars 5,000
7 Int erest on loan given to relat ive 7,000
8 Int erest on deb entures o f a company (listed in a reco gnized stock 4,000
exc hange) (36 00 X10 0/90)
9 Int erest on Po st of fic e Saving Account exemp t
10 Int erest on Govt. Securities 2,200
11 Int erest on Mon thly Inc om e Sch eme of Post Office 33,000
Incom e from other sources 1,3 4,200

st
Q28 (Q 16 KP)—Mr.Shivanand has following investm ents in the previous year ended 31
March, 2023:
a) Rs 11,000, 10% Karnatak a State Govt. Loan.
b) Rs 30,000, 13.5% Debentures of T ata Motors Ltd. (Listed)
c) Rs 35,000, 11% securities of Sugar Mills Company (not listed)
d) Rs 36,000, 10% Tax free commercial securities (unlisted)
e) Rs 3,580 received as interest on T amil Naidu Govt. Securities.
f) Rs 4,500, received as interest on the debentures of a Paper Mills Company (not listed)
g) Rs 4500, received as interest on the debentures of Textiles Company (listed).
During the previous year 2022-23 he purchased Rs 50,000, 7% capital investm ent bonds in
st
1 October, 2022. For this purpose he borrowed Rs 30,000 from Bank @ 15% p.a. Interest
th st
on all securities is payable on 30 June and 31 December. The bank charged 1.5%
commission on Net realization of interest as collection charges.
He was also director in a com pany f rom which he received Rs 3000 as director fees. His
other incomes are:--
(i) W inning from Lottery Rs 25,000
(ii) Income from Agriculture in Sri Lank a Rs 10,000.
(iii) W inning from Horse Race Rs 15000.
(iv) Interest on Post Office Saving Bank Account Rs 2000.
Find out his taxable incom e from other sources for the AY 2023-24
An swe r—
Interest Income
1) Interest on Karnataka State GovtLoan (11000X10%) 1100

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2) Interest on Debentures of LMT (30000 X 13.5%) 4050

3) Interest on securities of Sugar Mills Co (35000X11%) 3850
4) Interest on T ax free commercial securities (3600X100/90) 4000
5) Interest on T amil Naidu Govt. securities (Never grossed up) 3580
6) Int. on debentures of Paper Mills Com (4500X100/90) 5000
7) Int. on debentures of T extiles co. (no T DS interest is not 4500
exceeded Rs 5000)
8) Interest on capital investment bond exempted
26080
Less: Bank collection Charges
(26080—(NIL+NIL+385+400+500+NIL)= 24795X1.5% (372) 25708
Casual Income
W inning from lotteries 25000
W inning from Horse Race 15000 40000
Other Income
Agricultural Income from Sri Lanka 10,000
Director Fees 3,000 13,000
Income from Other Sources 78708

Q 29 (KP) Shri Nitin Bose f urnishes the following particulars of his income for the assessment
year 2020-21. He had the following investm ents as on 1.4.2022
a) Rs 50,000, 5% Central Govt. Loan
b) Rs 40,000 6% Govt. Securities
c) Rs 20,000. 8% Pref erence Shares of a Paper Mill.
d) Rs 20,000 Equit y shares of a T ea Company whose 60% incom e is deem ed to be
agricultural income. Dividend received on 1.5.2022 is Rs 4,000.
e) Rs 60,000, 15% Debentures of a lim ited company (Listed).
f) Rs 10,000, 10% Securities issued by Govt. of Nepal.
g) Rs 50,000 National Saving Certif icates (VIII issue acquired on 1.11.2021).Interest
accrued for financial year Rs 4,520.
h) Rs 18,000, 10% (Tax-free) Debentures of a limited company (unlisted)
i) Rs 5,000, Debentures of a Cooperative Society. Interest received during the year Rs
450.
j) Rs 1,40,000 Fixed Deposits in SBI for f ive years. T he interest accrued f or the year Rs
14,000. T DS @ 10%.
st
On 1 September 2022 he bought Rs 50,000; 10% Punjab Govt. Loan interest on which
st
is payable on 31 Decem ber. For this purpose he took a loan from his bank ers for Rs
40,000 at 10% p.a. and Rs 20,000 were f inanced out of personal loan tak en for the
purchase of motor car @ 10% p.a.
Bank collection charges amounted to Rs 800 and a commission of Rs 1800 was paid on
purchase of securities.
Com pute his income from other sources for the assessment year 2023-24.
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Answ er—COM PUTATION OF INCOME FROM OT HER SOURCES FOR T HE AY 2023-24

Detail Amount
Interest on Rs 50,000 5% Central Govt. Loan 2,500
Interest on Rs 40,000 6% Govt. Securities 2,400
Interest on Rs 60,000 15% Debentures of a Co. 9,000
Interest on National Saving Certificates (VIII issue) 4,520
Interest on T ax free debentures of a unlisted com pany 2,000
(1800x100/90) 5,000
Interest on Rs 50,000, 10% Panjab Govt. Loan 1,000
Interest on Rs 10,000, 10% Nepal Govt. Bonds 450
Interest on Debentures of Co-operative Society 14,000
Interest on SBI Fixed Deposit
Gross Interest 40,870
Less: Expenses
Collection Charges (800)
Interest on Loan (40,000 X 10%X 7/12) (2,333) 37,737
Dividend
Dividend on Rs 20,000, 8% preference shares 1600
Dividend on equit y shares 4000 5600
Income from Other Sources 43337

Q30 (SM) Examine under which heads the f ollowing incomes are taxable:
(i) Rental income in case property held as stock in trade f or 3 years.
(ii) Dividend on shares in case of a dealers in shares.
(iii) Salary received by a partner from his partnership f irm.
(iv) Rental income of Machinery.
(v) W inning from lotteries by a person having the same as business activit y.
(vi) Salary payable to a Member of Parliament.
(vii) Receipts without consideration.
(viii) In case of retirement, interest on employee’s contribution if provident f und is
unrecognized.
(ix) Rental income in case of a person engaged in the business of letting out of
properties .
An swe r—

Particulars Head of Income

(i) Rental income in case property held as stock in trade for Income from house
3 years property
(ii) Dividend on shares in case of a dealers in shares. Income from other sources
(iii) Salary by partner from his partnership firm Business Income

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(iv) Rental income of machinery Income f rom other sources

/Business Income
(v) W inning from lotteries by a person having the sam e as Income from other sources
business activity
(vi) Salary payable to a Member of Parliament Income from other sources
(vii) Receipts without consideration Income from other sources
(viii) In case of retirement, interest on employee’s contribution Income from other sources
if provident f und is unrecognized.
(xi) Rental incom e in case of a person engaged in the Business Income
business of letting out of properties

Q 31 (SM) Examine whether the following are chargeable to tax and the am ount liable to tax:
(i) A sum of Rs 1,20,000 was received as gift f rom non-relatives by Raj on the occasion
of the marriage of his son Pravin.
(ii) Interest on enhanced compensation of Rs 96,000 received on 12.3.2023 for
acquisition of urban land, of which 40% relates to the earlier year.
Answer—
S no. Taxable/Not Amt liable Reason
Taxable to tax
(i) Taxable 1,20,000 T he exemption from applicabilit y of section 56(2)(x) would
be available if gift is received from a relative or gif t is
received on the occasion of m arriage of the individual
him self. In this case, since gift is received by Mr. Raj
from a non-relative on the occasion of marriage of his
son, it would be taxable in his hands u/s 56(2)(x)
(ii) Taxable 48,000 Interest received by the assessee on enhanced
compensation shall be deem ed to be the income of the
year in which it is received, irrespective of the m ethod of
accounting followed by the assessee.
Interest of Rs 96,000 on enhanced compensation is
chargeable to tax in the year of receipt, i.e. PY 2022-23
after providing deduction of 50% . T heref ore, Rs 48,000
is chargeable to tax under the head “Incom e from other
Sources”.

Note—Interest will be taxable in the hands of investor who holds the investment
at the record date of interest

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‘Never underestimate your own strength. You were

born for a purpose and are blessed with the power
to achieve it.’

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