INTRODUCTION

Any gain arising on the transfer [except such transfers as are given in sections 46 and 47] of a
capital asset [sec. 2(14)] is chargeable to tax under section 45, if it is not eligible for
exemption under sections 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GA, 54GB and 54H.
Incidence of tax on capital gains, however, depends upon whether capital gain is a short-term
capital gain or a long-term capital gain [sec. 2(42A)].

In other words, capital gain’s tax liability arises only when the following conditions are
satisfied:

Condition-1 There should be a capital asset.

Condition-2 The capital asset is transferred by the assessee
Condition-3 Such transfer takes place during the previous year.
Condition-4 Any profit or gains arises as a result of transfer.
Condition-5 Such profit or gains is not exempt from tax under sections 54, 54B, 54D,
54EC, 54EE, 54F, 54G, 54GA and 54GB.
If the aforesaid conditions are satisfied, then capital gain is taxable in the assessment year
relevant to the previous year in which the capital asset is transferred.

However, in a few cases different rules are applicable. Such as-

1. What Is Included In And Excluded From Capital Asset

“Capital asset” is defined by section 2(14).

Positive list –

“Capital asset” means property of any kind, whether fixed or circulating, movable or
immovable, tangible or intangible. Besides, it includes the following –

1. Any rights in or in relation to an Indian company, including rights of management or

control or any other rights whatsoever.
2. Property of any kind held by an assessee (whether or not connected with his business
or profession).
3. Any securities held by a Foreign Institutional Investor which has invested in such
securities in accordance with the regulations made under the SEBI Act.
Negative list –

The following assets are excluded from the definition of “capital assets” –

1. Stock-in-trade (other than securities referred to in point 3 above).

2. Personal effects (movable assets).
3. Agricultural land in a rural area in India.
4. A few gold bonds and special bearer bonds (this point does not have any practical
utility).
5. Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit
certificates issued under the Gold Monetisation Scheme, 2015.

Stock-in-trade is not a capital asset –

Any stock-in-trade, (not being securities held by a Foreign Institutional Investor),

consumable stores or raw material held for the purpose of business or profession is not a
capital asset. This is because of the fact that any surplus arising on sale or transfer of stock-
in-trade, consumable stores or raw material is chargeable to tax as business income under
section 28. What shall be included in the term “stock-in trade” must always be dependent
upon the nature of the business of the taxpayer. For instance, if the taxpayer deals in house
properties, then such properties are stock-in-trade and, consequently, they are not capital
asset. If a dealer in properties transfers his stock-in-trade (i.e., house properties), the resulting
profit is business income not capital gains. Conversely, if a doctor transfers a house property,
the resulting income is taxable under the head “Capital gains”.

Personal effects (being movable assets) are not capital assets –

Any movable property (including wearing apparel and furniture) held for personal use of the
owner or for the use of any member of his family dependent upon him, is not a “capital asset”
for the purpose of income under the head “Capital gains”. However, the following are not
“personal effects” (in other words, the following are “capital assets”) even if these are for
personal use— jewellery, archaeological collections, drawings, paintings, sculptures, or any
work of art.

Agricultural land situated in rural area is not a capital asset –

Agricultural land in India in a rural area† is not capital asset.

2. Short-Term/Long-Term Capital Assets –

“Short-term capital asset” means a capital asset held by an assessee for not more than 36
months, immediately prior to its date of transfer. In other words, if a capital asset is held by
an assessee for more than 36 months, then it is known as “long-term capital asset”.

WHEN SUCH PERIOD IS TAKEN AS 12 MONTHS/ 24 MONTHS –

If a capital asset is transferred after 36 months, it is known as long-term capital asset.

However, in the following cases a capital asset becomes long-term capital asset if it is
transferred after 12 months or 24 months –

Category A –

Period of holding more than 12 months (if transfer takes place after July 10, 2014) –

1. Equity or preference shares in a company (listed in a recognised stock exchange in

India).
2. Securities (like debentures, bonds, Government securities, derivatives, etc.) listed in a
recognised stock exchange in India.
3. Units of UTI (whether quoted or not).
4. Units of an equity oriented mutual fund (whether quoted or not).
5. Zero coupon bonds (whether quoted or not).

Category B –

Period of holding more than 24 months–

1. Equity or preference shares in a company (unlisted) (if transfer takes place on or after
April 1, 2016).
2. Immovable property (being land or building or both) (if transfer takes place on or
after April 1, 2017).

HOW TO DETERMINE PERIOD OF HOLDING –

Specific rules are provided by the Income-tax Act to determine period of holding of a capital
asset in a few cases.

WHY CAPITAL ASSETS ARE DIVIDED IN SHORT/LONG-TERM ASSETS –

The tax incidence under the head “Capital gains” depends upon whether the capital gain is
short-term or long-term. Long-term capital gain is generally taxable at a lower rate. If the
asset transferred is a short-term capital asset, capital gain will be short-term capital gain.
Conversely, long-term capital gain arises on transfer of a long-term capital asset.
In the case of transfer of a depreciable asset (other than an asset used by a power generating
unit eligible for depreciation on straight line basis), capital gain (if any) is taken as short-term
capital gain, irrespective of period of holding.

3. What Is Transfer Of Capital Asset 94.

Transfer, in relation to a capital asset, includes sale, exchange or relinquishment of the asset
or the extinguishment of any rights therein or the compulsory acquisition thereof under any
law [sec. 2(47)].

Capital Assets, Capital Gain & Transfer of Capital Assets for Taxation of 'Capital Gain'

1. Basis of Charge in case of Capital Gain [Section 45(1)]

2. Capital Asset for Computing Capital Gain [Section 2(14)]
3. Types of Capital assets:
4. Type of Capital Gains:
5. Transfer of Capital Assets to arise Capital Gain
6. Capital Gain should arise in the previous year in which Transfer took place.
1. Basis of Charge in case of Capital Gain [Section 45(1)]

Any profits or gains arising from the transfer of a capital asset effected in the previous year,
shall be chargeable to income-tax under the head 'Capital Gains' and shall be deemed to be
the income of the previous year in which the transfer took place unless such capital gain is
exempt under section 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GA or 54GB.

The following are the essential conditions for Taxing capital gains:
A. there must be a capital asset;
 B. the capital asset must have been transferred;
C. there must be profits or gains on such transfer, which will be known as capital gain;
D. such capital gain should not be exempt under section 54, 54B, 54D, 54EC, 54EE, 54F,
54G, 54GA or 54GB.

If the above conditions are satisfied, the capital gain shall arise and taxed in the previous year
in which the asset is transferred, subject to certain exceptions

Note :

In case of profit or gain from insurance claim, due to damage or destruction of property,
there will be capital gain, although no asset has been transferred in such case

2. Capital Asset for Computing Capital Gain [Section 2(14)]

“Capital asset” means : -

Property of any kind, whether fixed or circulating, movable or immovable, tangible or

intangible. Besides,

it Includes the following –

1. Any rights in or in relation to an Indian company, including rights of management or

control or any other rights whatsoever.
2. Property of any kind held by an assessee (whether or not connected with his business
or profession).
3. Any securities held by a Foreign Institutional Investor which has invested in such
securities in accordance with the regulations made under the SEBI Act.

but Does Not Include––

i. any stock-in-trade [other than the securities referred to in sub-clause (b) above],
consumable stores or raw materials held for the purposes of his business or
profession,
ii. personal effects, that is to say, movable property (including wearing apparel and
furniture), held for personal use by the assessee or any member of his family
 dependent on him. However, the following assets shall not be treated as personal
effects though these assets are moveable and may be held for personal use:
a. jewellery;
b. archaeological collections;
c. drawings;
d. paintings;
e. sculptures; or
f. any work of art.
iii. Agricultural land in India, which is not an urban agricultural land. In other words, it
must be a rural agricultural land;
iv. Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit
certificates issued under Gold Monetisation Scheme, 2015 notified by the Central
Government.

3. Types of Capital Assets:

Capital assets are of two types:

1. Short-Term Capital Asset (STCA)

2. Long-Term Capital Asset (LTCA)
(1) Short-Term Capital Asset - STCA [Section 2(42A)]:

A capital asset held by an assessee for Not more than 36 months immediately preceding the
date of its transfer is known as a short term capital asset.

Exceptions :

1. The following assets shall be treated as short-term capital assets if they are held
for Not more than 12 months (instead of 36 months mentioned above) immediately
preceding the date of its transfer:
a. a security including shares (other than unit) listed in a recognised stock
exchange in India
b. a unit of an equity oriented fund
c. a zero coupon bond
 2. The following assets shall be treated as short-term capital assets if they are held
for Not more than 24 months (instead of 36 months/12 months mentioned
above) immediately preceding the date of its transfer:
a. Share of a company (not being a share listed in a recognised stock exchange in
India)
b. An immovable property being land and building or both.

Hence, if unlisted share or immovable property is transferred after 24 months from the date of
its acquisition, the gain arising from the transfer of share or immovable property shall be
treated as long-term capital gain.

(2) Long-Term Capital Asset - LTCA [Section 2(29A)]:

It means a capital asset which is not a short-term capital asset.

In other words, if the asset is held by the assessee for more than 36 months/24 months/12
months, as the case may be, such an asset will be treated as a long-term capital asset

(3) Meaning of Capital Assets in Graphical Chat (Section 2(14) :

4. Type of Capital Gains:

Since there are two types of capital assets, there will be two types of Capital Gains i.e.—

1. Section 2(42B) Short-Term Capital Gain —

Gain arising on the transfer of short-term capital asset.

2. Section 2(29B) Long-Term Capital Gain —

Gain arising on the transfer of long-term capital asset.

5. Transfer of Capital Assets to arise Capital Gain

Capital gain arises only when there is a transfer of capital asset. If the capital asset is not
transferred or if there is any transaction which is not regarded as transfer (See para 7.3b),
there will not be any capital gain. However, in case of profits or gains from insurance claim
due to damage or destruction of property, there will be capital gain although no asset has
been transferred in such case.

1. What is Transfer of Capital Assets [Section 2(47)]:

Transfer, in relation to capital asset, includes:

i. the sale, exchange or relinquishment of the asset; or

ii. the extinguishment of any rights therein; or
iii. the compulsory acquisition thereof under any law; or
iv. in a case where the asset is converted by the owner thereof into, or is treated by him,
as stockin-trade of a business carried on by him, such conversion or treatment; or
v. the maturity or redemption of zero coupon bonds; or
vi. any transaction involving the allowing of the possession of any immovable property
to be taken or retained in part performance of a contract of the nature referred to in
section 53A of the Transfer of Property Act, 1882; or
vii. any transaction (whether by way of becoming a member of, or acquiring shares in a
cooperative society, company or other association of persons or by way of any
agreement or any arrangement or in any other manner whatsoever) which has the
effect of transferring, or enabling the enjoyment of any immovable property.

2. Transactions Not regarded as Transfer of Capital Assets [Sections 46 and 47]:

The meaning of transfer is given in section 2(47), whereas transactions not regarded as
transfer are covered u/ss 46 and 47. In many transactions although there is a transfer, but
these are not considered to be transfer for purposes of capital gains.

Some of the relevant transactions which are not regarded as transfer are:

i. where the assets of a company are distributed to its shareholders on liquidation of a

company, such distribution shall not be regarded as transfer in the hands of the
company [Section 46(1)];
ii. any distribution of capital assets on the total or partial partition of Hindu Undivided
Family [Section 47(i)];
iii. any transfer of a capital asset under a gift or will or an irrevocable trust [Section
47(iii)];
iv. any transfer of a capital asset by a company to its 100% subsidiary company provided
the subsidiary company is an Indian company [Section 47(iv)];
v. any transfer of a capital asset by a 100% subsidiary company to its holding company,
if the holding company is an Indian company [Section 47(v)];
vi. any transfer in a scheme of amalgamation of a capital asset by the amalgamating
company to the amalgamated company, if the amalgamated company is an Indian
company [Section 47(vi)];
vii. any transfer in a scheme of amalgamation of shares held in an Indian company by the
amalgamating foreign company to the amalgamated foreign company if certain
conditions are satisfied.
viii. any transfer, in a demerger, of a capital asset by the demerged company to the
resulting company, if the resulting company is an Indian company [Section 47(vib)];
ix. any transfer in a demerger, of a capital asset, being a share or shares held in an Indian
company, by the demerged foreign company to the resulting foreign company, if
certain conditions are satisfied.
x. any transfer or issue of shares by the resulting company, in a scheme of demerger to
the shareholders of the demerged company if the transfer or issue is made in
consideration of demerger of the undertaking [Section 47(vid)];
xi. any transfer by a shareholder, in a scheme of amalgamation, of shares held by him in
the amalgamating company if certain conditions are satisfied:
xii. any transfer, made outside India, of a capital asset being rupee denominated bond of
an Indian company issued outside India, by a non-resident to another non-resident;
[Section 47(viiaa)]

3. Transfer in case of Immovable and Movable Property

Different rules are applicable in case of movable/immovable assets to find out when a capital
asset is “transferred”.

1. Transfer in case of Immovable property when documents are registered -

Title to immovable assets will not pass till the conveyance deed is executed or registered.

2. Transfer in case of Immovable Property when documents are not registered -

Even if the documents are not registered but the following conditions of section 53A of the
Transfer of Property Act are satisfied, ownership in an immovable property is “transferred”—

a. there should be a contract in writing;

b. the transferee has paid consideration or is willing to perform his part of the contract;
and
c. the transferee should have taken possession of the property.

When these conditions are satisfied, the transaction will constitute “transfer” for the purpose
of capital gains.

3. Transfer in case of Movable Property -

Title to a movable property passes at the time when property is delivered pursuant to a
contract to sell. Entries in the books of account are not relevant for determining date of
transfer.

6. Capital Gain should arise in the previous year in which Transfer took place.

Normally, capital gain arises in the previous year in which the transfer of the asset takes place
even if the consideration for the transfer is received or realised in a later year.
There are, however, 4 exceptional cases where capital gain is taxable not in the year of
transfer of the asset, but in some other year. These exceptions are:

1. damage or destruction of any capital asset by fire or other calamities

2. conversion of capital asset into stock-in-trade (discussed in para 7.13c);
3. compulsory acquisition of an asset (discussed in para 7.13f).
4. transfer of capital asset, being land or building or both by an individual HUF under a
specified agreement with the developer [Section 45(5A)]
5.

6.
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10.

11. Real estate investment trusts (REITS) are corporate entities investing in real estate,
mortgages or a hybrid of the two. Many REITS are traded on public stock
exchanges like equity securities, although REITS may be privately held as well. In
the United States, the income from REITS is taxed to individual shareholders when
distributed annually and when the REIT is sold.
12. REIT Corporate Taxation
13. Before income from REITs is taxed to the shareholders, REITs must meet certain
requirements under section 856 of the U.S. Internal Revenue Code. Of these
requirements, the most significant is that at least 90 percent of the REIT's taxable
income must be distributed to the REIT's shareholders in the form of dividends.
Even when this 90 percent requirement is met, any taxable income of the REIT that
is not distributed to shareholders is taxable to the REIT at corporate income tax
rates.
14. Dividends
15. When REITs distribute annual earnings to taxpayers, these earnings are taxable to
the shareholders as dividend investment income. For individual income tax payers,
 dividend income is taxable at full, ordinary income levels, except when classified as
"qualified dividends." While the IRS has a number of requirements for REIT
distributions to be taxed as qualified dividends, this requirement is generally met by
shareholders who have owned the REIT for a minimum of 60 days before or after
the dividend was declared. When REIT dividends are considered qualified, they are
taxed at long-term capital gain rates, which are significantly less than ordinary
income tax rates.
16. Capital Appreciation
17. The final portion of REIT taxation occurs when the REIT shareholder sells his
interest in the REIT. The Internal Revenue Service (IRS) treats the sale of interests
in a REIT in the same manner as the sale of other capital assets, such as stocks and
bonds. Shareholders are taxed on the capital appreciation or depreciation of the
REIT's shares. When the value of the REIT's shares have increased, the shareholder
has a capital gain. When the value of the REIT's shares have declined, the
shareholder has a capital loss. Investors who have held the REIT's shares for more
than one year are eligible for taxation at reduced long-term capital gain rates.
18. Limitations on Capital Losses
19. While there are no limitations to the amount of capital appreciation a shareholder
may claim on an individual income tax return, a taxpayer may only claim a capital
loss up to $3,000 annually. Taxpayers may first offset any capital loss from the sale
of REIT shares against all other sources of capital gains income. After this offset,
the first $3,000 of loss may be offset against all other forms of the taxpayer's
income. Any loss that the taxpayer cannot claim during the current tax year may be
carried over to the subsequent tax year.

Exemption of Capital Gains under Sections 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GB
and 54H

ADVANTAGES

20. Tax Deferment

One advantage of capital gains taxes is that tax payments are deferred until the asset is sold.
For example, a real-estate investor does not pay taxes on the equity gained in a property
investment until the year he sells the property for a profit. Further, a securities investor does
not pay capital-gains taxes on profits earned from stocks and bonds until he takes a
distribution or sells the assets. Investors only pay taxes during the tax year they realize the
gain. This is different than income taxes where you must pay a tax each time you receive an
income payment.

Profit Reduction

According to the Internal Revenue Service, nearly everything you own for personal use or
investment purposes is a capital asset. A drawback to owning capital assets is that if they are
sold for profit, the IRS requires that you report gains as income. The disadvantage of this tax
is that it can reduce the overall profits realized from the sale of the asset.

Tax Rates

The amount of taxes you must pay on a capital gain depends on the length of time you owned
the asset prior to selling and can either be a benefit or detriment to the taxpayer. If you owned
the asset longer than 12 months and realize a profit, you have a long-term capital gain, which
is taxed at a lower rate. If you own an asset less than 12 months and sell it for a profit, you
have a short term capital gain, which is taxed at a higher rate. Long-term capital-gains taxes
are more advantageous than short-term capital-gains taxes because the rate typically produces
savings.
For 2018, long-term capital gains tax rates vary between 0 and 20 percent, depending on the
taxpayer's income tax bracket. For example, those in the 10 or 15 percent tax brackets pay a
long-term capital gains rate of 0 percent, while those in the 39.6 percent bracket pay the full
20 percent. Certain special categories have their own capital gains rates. For example, an
unrecaptured section 1250 gain is taxed at 25 percent; gains on collectibles and certain types
of small business stock are taxed at 28 percent, while short-term capital gains are always
taxed at ordinary income rates.
You can use tax losses to offset capital gains and up to $3,000 of ordinary income. However,
if you're selling stock to capture a tax loss, avoid buying it back within 30 days, or the loss
will be disallowed per IRS wash sale rules.
Double Taxation

Taxpayers are responsible for paying federal, and in many cases, state capital-gains taxes.
Property owners and investors, for example, must report capital gains from the sale of real
estate on both federal and state income-tax returns in most states. The additional tax on the
state level is a disadvantage for many taxpayers.

OTHER SOURCES

Income from Other Sources

Any income which is not chargeable to tax under any other heads of income and which is not
to be excluded from the total income shall be chargeable to tax as residuary income under the
head “Income from Other Sources”.

1. Basis of Charge [Sec. 56]:

Income chargeable to tax under the head “Income from other sources” shall include following:

S. Nature of income taxable as residuary income

No.

1. Dividends

2. Income by way of winnings from lotteries, crossword puzzles, races including horse
races, card games, gambling or betting of any form or nature whatsoever

3. Any sum received by an employer from his employees as contribution towards

PF/ESI/ Superannuation Fund etc., if same is not deposited in the relevant fund and it
is not taxable under the head ‘Profits and Gains from Business or Profession’.

4. Interest on securities, if not taxable under the head ‘Profits and Gains of Business or
Profession’

5. Income from machinery, plant or furniture belonging to taxpayer and let on hire, if
income is not chargeable to tax under the head ‘Profits and Gains of Business or
Profession’
6. Composite rental income from letting of plant, machinery or furniture with buildings,
where such letting is inseparable and such income is not taxable under the head
‘Profits and Gains of Business or Profession’

7. Any sum received under Keyman Insurance Policy (including bonus), if not taxable
under the head ‘Profits and Gains of Business or Profession’ or under the head
‘Salaries’

8. In the following cases, any sum of money or property received by a person from any
person (except from relatives or member of HUF or in given circumstances, see note
1) shall be taxable under the head ‘Income from other sources’:
a) If any sum is received without consideration in excess of Rs. 50,000 during the
previous year, the whole amount shall be chargeable to tax;
Though the provisions relating to gift applies in case of every person, but it has been
reported that gifts by a resident person to a non-resident are claimed to be non-taxable
in India as the income does not accrue or arise in India. To ensure that such gifts made
by residents to a non-resident person are subjected to tax in India, the Finance (No. 2)
Act, 2019 has inserted a new clause (viii) under Section 9 of the Income-tax Act to
provide that any income arising outside India, being money paid without consideration
on or after 05-07-2019, by a person resident in India to a non-resident or a foreign
company shall be deemed to accrue or arise in India.
b) If an immovable property is received without consideration and the stamp duty
value exceeds Rs. 50,000, the stamp duty value of such property shall be chargeable
to tax;
c) If immovable property is received for consideration which is less than the stamp
duty value of property by higher of following amount the difference is chargeable to
tax:
(i) the amount of Rs. 50,000
(ii) the amount equal to 10% of consideration.
d) If movable properties* is received without consideration and the aggregate fair
market value of such properties exceeds Rs. 50,000, the whole of aggregate fair market
value of such properties shall be chargeable to tax
 e) If movable properties is received for consideration which is less than the aggregate
fair market value of properties by an amount exceeding Rs. 50,000, the difference
between the aggregate fair market value and the consideration is chargeable to tax.

9. If shares in a closely held company are received by a firm or another closely held
company from any person without consideration or for inadequate consideration, the
aggregate fair market value of such shares as reduced by the consideration paid, if
any, shall be chargeable to tax.
Note: Nothing would be chargeable to tax if taxable amount doesn’t exceed Rs.
50,000.

10. If a closely held public company receives any consideration for issue of shares which
exceed the fair market value of such shares, the aggregate consideration received for
such shares as reduced by its fair market value shall be chargeable to tax.
Note: This provision is not applicable in the following cases:
a) Where the consideration for issue of shares is received by a venture capital
undertaking from a venture capital company or venture capital fund or a specified fund.
“Specified fund” means a fund established or incorporated in India in the form of a
trust or a company or a LLP or a body corporate which has been granted a certificate
of registration by SEBI as a Category I or Category II Alternative Investment Fund
(AIF).
b) Where the consideration for issue of shares is received by company from class or
classes of person as notified by the Government.
In this regard, the Government has provided that section 56(2)(viib) shall not apply
where consideration is received by a start-up company in respect of shares issued to a
resident person. However, a start-up company shall fulfil the condition mentioned in
the Notification No. 127(E), dated 19-02-2019 issued by the Department for
Promotion of Industry and Internal Trade (DPIIT).
With a view to ensure compliance to the conditions specified in the said notification,
the Finance (No. 2) Act, 2019 reiterates that in case of failure to comply with the
conditions specified in the notification, the consideration received from issue of shares
as exceeding the fair market value of such shares, shall be deemed to be income of the
company chargeable to tax for the previous year in which such failure takes place.
 Further, it shall be deemed that the company has misreported the said income and,
consequently, a penalty of an amount equal to 200% of tax payable on the
underreported income (i.e., difference between issue price and fair market value of
shares) shall be levied as per section 270A.

10A. Any compensation received by a person in connection with the termination of his
employment or modification of terms and conditions relating thereto.

11. Interest received on compensation or enhanced compensation

12. Any sum of money received as an advance or otherwise in the course of negotiations
for transfer of a capital asset shall be charged to tax under this head, if:
a) Such sum is forfeited; and
b) The negotiations do not result in transfer of such capital asset.

* ‘Movable property’ shall include shares, securities, jewellery, archaeological collection,

drawings, paintings, sculptures, any work of art or bullion etc.

1.1 Gifts not chargeable to tax [Sec. 56(2)(vii)]

Any sum of money or property received by any person [on or after 01-04-2017] in the following
circumstances shall not be chargeable to tax:

a) Gifts received from relatives;

b) Gifts received by an individual on occasion of his/her marriage;

c) Gifts received by way of Inheritance/will;;

d) Gifts received in contemplation of death of the payer;

e) Gifts received from any local authority;

f) Gifts received from any fund, foundation, university, educational institution, hospital,
medical institution, any trust or institution referred to in Section 10(23C);

g) Gifts received from any trust or institution registered under section 12A/12AA.

h) Share received as a consequences of demerger or amalgamation of a company under clause

(vid) or clause (vii) of section 47, respectively.
i) Share received as a consequences of business reorganization of a co-operative bank
under section 47(vicb)

j) from such class of persons and subject to such conditions as may be prescribed

** ‘Relative’ shall mean:

1. Spouse of the individual

2. Brother or sister of the individual

3. Brother or sister of the spouse of the individual

4. Brother or sister of either of the parents of the individual

5. Any lineal ascendant or descendant of the individual

6. Any lineal ascendant or descendant of spouse of the individual

7. Spouse of the person referred in point 2-6 above

2 Deductions [Sec. 57]:

The following expenditures are allowed as deductions from income chargeable to tax under the
head ‘Income from Other Sources’:

S.N. Section Nature of Income Deductions allowed

1. 57(i) Dividend or Interest on securities Any reasonable sum paid by way

of commission or remuneration
to banker or any other person for
purpose of realizing dividend or
interest on securities

2. 57(ia) Employee’s contribution towards If employees’ contribution is

Provident Fund, Superannuation credited to their account in
Fund, ESI Fund or any other fund relevant fund on or before the
setup for the welfare of such due date
employees
 3. 57(ii) Rental income letting of plant, Rent, rates, taxes, repairs,
machinery, furniture or building insurance and depreciation etc.

4. 57(iia) Family Pension 1/3rd of family pension subject to

maximum of Rs. 15,000.

5. 57(iii) Any other income Any other expenditure (not being

capital expenditure) expended
wholly and exclusively for
earning such income

6. 57 (iv) Interest on compensation or 50% of such interest (subject to

enhanced compensation certain conditions)

7. 58(4) Proviso Income from activity of owning All expenditure relating to such
and maintaining race horses. activity.

3 Expenses not deductible [Section 58]:

S.N. Section Nature of Income

1. 58(1)(a)(i) Personal expenses

2. 58(1)(a)(ii) Interest chargeable to tax which is payable outside India on which tax
has not been paid or deducted at source

3. 58(1)(a)(iii) ‘Salaries’ payable outside India on which no tax is paid or deducted at

source

4. 58(1A) Wealth-tax

5. 58(2) Expenditure of the nature specified in section 40A

6. 58(4) Expenditure in connection with winnings from lotteries, crossword

puzzles, races, games, gambling or betting