Income from Other Sources:

Section 56 (2) of the Act states that, every kind of income which is included in total income
under the Income tax Act, and which is not chargeable to income tax under any other head of
income, is chargeable to income tax under the head ‘Income from Other Sources’.

Basic Conditions:
1) Listed in the definition of income,
2) Not exempt from tax, and
3) Not included in any specific head i.e., salaries, house property, profits
and gains of business or profession and capital gains.
4) This means it is a residuary head which includes all those incomes which
are not included in a specific head.

Incomes chargeable under the head Other Sources:

1) Dividends
2) Income from winnings from lotteries, crossword puzzles, races including horse races, card
games or any other games, gambling, or betting etc.
3) Any sum received by the assessee from his employer as contribution to any provident fund
or superannuation fund or any fund set up under Employees’ Insurance Act, 1948 or any other
fund for the welfare of the employees provided it is not chargeable under the head “Profits
and Gains of Business or Profession”.
4) Income by way of interest on Securities if not chargeable under “Profits and Gains of
Business or Profession”.
5) Income from machinery, plant or furniture belonging to the assessee or has been let out
and if the income is not chargeable to income tax under the head ‘Business or Profession’.
6) Where an assessee lets on hire machinery, plant or furniture belonging to him and
buildings, and the letting of the buildings is inseparable from the letting of the said
machinery, plant or furniture, the income from such letting, if not chargeable to income tax
under the head ‘Business’ is chargeable under the head ‘Income from Other Sources’.
7) Any sum received under Keyman Insurance Policy, including bonus allocated on the
policy, if such income is not taxable under the head "Salaries" or "Profits and Gains of
Business or Profession."
8) Any sum of money, the aggregate value of which exceeds Rs. 50,000 is received without
consideration or property both movable and immovable is received without consideration or
property is received for an inadequate consideration by any person on or after 01.04.2017 if
the amount of such gift or inadequate consideration exceeds Rs. 50,000, then, after
subtracting consideration from stamp duty value, the balance amount shall be taxable income.
(For details see point 13.10 of this unit)
9) Where a closely held company receives in any previous year from any resident person any
consideration for issue of shares in excess of face value of share, then aggregate
consideration received for such shares over fair market value shall be taxable, however, this
income is subject
to certain exceptions.
10) Interest income received on compensation or enhanced compensation (50% taxable) shall
be taxed in the year of its receipt.
11) Forfeiture of advance received for transfer of capital asset is taxed under this head.
12) Any renewal or capital nature compensation received or receivable in connection with
termination or modification in the employment contract is taxable under this head.

Besides the above, there are some other incomes which are also chargeable under the head
'Income from Other Sources'. They are:
i) Any fees or commission received by an employee from a person other than his employer.
ii) Any annuity received under a will. It does not include an annuity received by an employee
from his employer.
iii) All interest other than interest on securities such as bank interest, loan interest etc.
iv) Income of a tenant from sub-letting the whole or part of the house property.
v) Remuneration received by a non-professional for doing examination work, viz., a
professor getting such remuneration.
vi) Income of Royalty.
vii) Director's fees.
viii) Rent of land not appurtenant to any building.
ix) Agricultural Income from land situated outside India.
x) Income from markets, ferries, and fisheries, etc.
xi) Income from leasehold property.
xii) Income of other persons included in the total income of the assessee, e.g., if the assessee
and his spouse are partners in the same firm, the share of income of the spouse is included in
the total income of the assessee under the head Income from Other Sources’.
xiii) Income received by non-professionals in consideration of writing articles in Journals.
xiv) Interest received on foreign securities.
xv) Income from undisclosed sources.
xvi) Interest received by an employee on his own contributions to an unrecognized provident
fund.
xvii) Salary of Member of Parliament, Member of Legislative Assembly or Council.
xviii) Interest received on securities of a Co-operative Society.
xix) Family pension received by the widow and heirs of deceased employee.
xx) Amount withdrawn from deposit in National Savings Scheme on which
deduction u/s 80 CCA has been allowed including interest thereon.
xxi) Casual Income other than lottery etc.
xxii) Income from commission of insurance agent.
Etc. incomes that are not part of any other head of Incomes.

Tax free in case of other sources: -

 Interest from Capital Investment Bond
 Interest on Post Office Savings
 Interest on National Relief Bond
 Income from UTI
 Any Allowance to a M.P. (Member of Parliament)
Deductions
1) A. collection charges of dividend or interest income are allowed as deduction to a
reasonable amount. No such deduction is allowed in case of a foreign company.
B. Interest on money borrowed for purchasing the shares/securities can be claimed as
deduction.
C. Any other reasonable amount of expenditure (not being of capital nature) incurred
to earn such income can be claimed as deduction
D. Deduction on dividends (or income from units of mutual fund or specified
company) can be only for interest on loan taken to invest in shares and in any
previous year, this deduction cannot exceed 20% of the dividend income or income
from units for that year.
2) Where employees' contribution to Provident Fund, etc., are treated as the income of
the assessee (employer), it is included in his income from other sources and a
deduction of the sum, credited by the assessee to the employee's account in the
relevant fund on or before the due date, will be allowed under this head. However, if
the aforesaid income falls under the head ‘Profits and Gains of Business And
Profession’, it will not be taxed under the head Income from other sources.
3) In the case of income from letting of machinery, plant or furniture along with letting
of buildings, which is chargeable to tax under the head 'Income from other sources';
the deductions in respect of the following shall be allowed:
i) Expenditure incurred regarding current repairs of machinery, plant, furniture
or building.
 ii) Insurance premium paid regarding building, machinery, plant or furniture.
iii) Depreciation on buildings, machinery, plant or furniture, unabsorbed
depreciation is also allowed as deduction as per Income Tax Act. iv) Any other
expenditure relating to factory and its assets.
4) In case of income in the nature of family pension received by the widows or heirs of
deceased employee, a deduction of sum equal to 33 1/3% of such income or Rs.
15,000, whichever is less, will be allowed.
5) Any other revenue expenditure incurred wholly and exclusively for the purpose of
earning such income. It should not be in the nature of personal expenses of the
assessee. No such deduction is allowed in case of a foreign company.
6) In case of interest income on compensation or enhanced compensation, a deduction of
50% of such income shall be allowed as deduction but no other deduction under this
section should be allowed.
Losses under the head ‘Income from Other Sources’ can be set off in the same year as per the
income tax law and income not set off in the financial year can be carried forward as per
income tax act provisions.