Sunday 15 January 2012

FAQ - INCOME FROM OTHER SOURCE

Q. What constitutes Income from other sources?
      A. A source of income, which does not specifically fall under any of the
      other heads of income namely Salary, Income from house property , Profits
      and gains from business or profession or capital gains will be brought to
      charge under section 56 under the head `Income from other sources'. In
      other words, it can be said that the residuary head of income can be
      resorted to only if none of the specific heads is applicable to the income
      in question, and that comes into operation only if the other heads are
      excluded.
      Q. What are the various incomes taxable under the head Income from Other
      Sources?
      A. The following incomes are chargeable under this head, namely, Income
      from interest on bank deposits and loans, royalty, directors fees, ground
      rent, agricultural income from outside India, examination fees received by
      a teacher, rent of a plot of land, insurance commission, mining rent and
      royalties, casual income in excess of Rs. 5000 (Rs. 2500 in case of
      winnings from races including horse races), winnings from lotteries,
      crossword puzzles, card games etc. Income from machinery, plant or
      furniture let on hire and interest on Securities.
      Q. What is deemed dividend and is it taxable?
      A. Any payment by way of a loan or advance by a closely-held company to a
      registered shareholder holding substantial interest - provided the loan
      should not have been made in the ordinary course of business, and
      money-lending should not form a substantial part of the company’s business
      - is treated as deemed dividend and is taxable under the head,Income from
      other sources. However, subsequent dividend to the extent it is so set-off
      against any loan or advance deemed as dividend is not taxable.
      Q. Are there any securities, the interest on which is exempt from tax?
      A. From the assessment year 1989-90, interest on the following is exempt
      from tax:
        Interest on notified securities, bonds and certificates. The notified
        securities/bonds etc., are: 12 year National Savings Annuity
        Certificates; National Defence Gold Bonds, 1980; Special Bearer Bonds,
        1991; Treasury Savings Deposit Certificate; Post Office Cash
        Certificates (5 years); National Plan Certificate (10 years); National
        Plan Certificates (12 years); Post Office National Savings Certificates
        (12 years/7 years); Public Account of Post Office Savings Account Rules
        (interest upto Rs. 5000); Post Office Savings Rules; Post Office CTD;
        Fixed Deposit [Government Savings Certificates (Fixed Deposits) Rules,
        1968 or Post Office (Fixed Deposit) Rules, 1968]; Special Deposit
        Scheme, 1981 and Non-Resident (Non-Repatriable) Rupee Deposit Scheme.

        Interest to an individual and Hindu undivided family on 7 % Capital
        Investment Bonds with effect from the assessment year 1983-84.

        Interest on notified bonds arising to non-resident Indians [i.e., NRI
        Bonds and NRI Bonds (Second Series), issued by the State Bank of India].

        Interest on securities held by the Issue Department of the Central Bank
        of Ceylon.

        Interest payable to any foreign bank performing central banking
        functions outside India in respect of deposits made by such bank with
        any scheduled bank in India (from assessment year 1985-86).

        Interest on 9% Relief Bonds, 1987 in case of an individual or a Hindu
        undivided family.

        Interest on notified debentures of public sector companies.

        Interest on deposits made in a notified scheme by a retired Government
        employee and an employee of a public sector company with effect from
        April, 1991 out of the money due to him on account of retirement,
        applicable from the assessment year 1990-91.

      Q. What do you mean by Family pension and how is it taxable ?
      A. “Family Pension” means a regular monthly amount payable by the employer
      to a person belonging to the family of an employee in the event of his
      death.
      Taxability : "Family Pension" will be taxable under the head, Income from
      Other Sources.
      The asseessee will be allowed a deduction of a sum equal to one-third (
      1/3 rd) of such income or rupees fifteen thousand , whichever is less

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