Few Points on Income from Other Source.

All those incomes which are not exempt and are to be taxed and are at the same time not covered in any of the four heads of income namely salary, house property, capital gains and business and profession is included in the head of income from other sources. The income included here is taxable on cash or mercantile basis whichever method assessee follows. There are certain incomes, which are specifically mentioned in section 56 of the income tax act to be included in the head of income from other sources, but there are various other incomes, which are not specified in section 56 of the income tax act but are still included in the income from other sources. The following income shall be chargeable to income tax under the head "Income from other sources", namely: -

1. Dividend;

2. Any annuity due or commuted value of any annuity paid under section 280D.

3. Any winning 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.

4. Any sum, received by the assessee from his employees as contributions to any provident fund or Superannuation fund or any fund set up under the provisions of the Employees State Insurance Act, 1948 (34 of 1948), or any officer fund for the welfare of such employees, if such income is not chargeable to income-tax under the head "Profits and gains of business or profession";

5. Income from machinery, plant or furniture belonging to the assessee and let on hire, if the income is not chargeable to income -- tax under the head "Profits and gains of business or profession";

6. Where an assessee lets on hire machinery, plant or furniture belonging to him and also 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 it is not chargeable to income tax under the head "Profits and gains of business or profession."

7. Any sum received under a Keyman insurance policy, including the sum allocated by way of bonus on such policy, if such income is not chargeable to income tax under the heads "Profits and gains of business and profession" or under the head "Salaries". (Keyman insurance policy means a life insurance policy taken by a person on the life of another person who is/ was the employee of the 1st mentioned person or who is/was connected in any manner whatsoever with the business of the 1st mentioned person.) So, basically "income from other sources" is the residuary head of income, which takes within its ambit any income, which does not specifically fall under any other head of income.

Ø  No deduction allowed in respect of expenditure whose corresponding income has been exempted from tax – Refer Section 14A.

Ø  Section 59 – it is similar to section 41(1) – where recovery of losses are taxable.

Ø  Following expenses are not deductible.

·         Personal Expenses.

·         Any Tax (Income tax/ FBT/ Wealth Tax)

·         Section 40(a)(i) – Where applicable TDS has not been deducted.

·         Capital expenditure

Ø     No deduction for Lottery, Crossword , Puzzle, Horse race etc.

Ø  Interest on enhanced compensation – 50% of such interest received is deductible.

Ø  Family Pension -  one third of amount or Rs. 15000/- - lower is deductible.

Ø  Section 145(1) – Both cash & mercantile system of accounting are accepted.

Enhanced compensation is taxable in the year of receipt only