Section 6

Residential status can be determined of a person and person includes-

1. An individual
2. HUF
3. Frim, OP,AJP
4. Company

Every person has a different residential status and not alike.

In case of HUF, it can be resident or non-resident, the basic condition for HUF which is needed to be fulfilled is that-

Its control and management of its affairs is wholly or partly in India.

Residential status of whole HUF is checked. Residential Stuatus ischecked by checking whether control and
management of its affairs is wholly r partly in inda, i.e. key roles. Even if a single decision with regard to that HUF is
taken from India then that HUF is a resident of India.

If control and management of a HUF’s affairs (i.e. decisions) is wholly done by outside india, then it will be a non-
resident.

If a HUF becomes resident, then we must focus only on KARTA. And to become Ordinary Resident, KARTA must fulfil
two basic conditions, they are-

1. He must reside in India for at least 2 years out of preceding 10 previous years, AND
2. Must be physically present in India for at least 730 days or more during the 7 preceeding Previous Years.

If KARTA does not satisfy additional conditions, HUF will be treated as Resident but not an Ordinary Resident.

Next comes Residential Status of Firm, Association of Persons, Body of Individuals and AJP.

All these persons, will either be treated as Resident or Non-resident. Basic condition to be resident is that, its Control
and management of its affairs is wholly or partly in India. And it will be non-resident, if control and management of
its affairs is wholly outside India. No further delegation, i.e. Ordinary resident or Resident but not an Ordinary
resident will be there.

Next comes residential status of Company.

A company will be resident if, it is an indian company, i.e. registered under Indian Companies Act. OR

Its Place of Effective Management is in India (where key management decisions of an entity as a whole are made).,
i.e. its key decisions are made wholly in India.

It will be Non-resident, if Control and management of its affairs is wholly or partially outside India.
Section 14

Heads of Income

Heads of income is given under chapter IV, section 14 of IT Act. A person is chargeable to income tax if his income
falls in any of the given heads given in section 14. They are Salaries, income from house property, profits and gains of
business or profession, capital gains or income from other sources. The income earned by any person is computed
under the following categories-

1. Income from Salary- this head taxes the income earned by an individual as salary from any firm or
orgainsation.
2. Income from House Property- This head taxes rental income received by any person from way of renting of
any immovable property.
3. Income from Business of Profession- this head of income broadly covers income earned by a person as
aresult of some business or professional set up by him.
4. Income from Capital Gains- this head of income taxes the income earned on sale of any investment in form
of gold, precious ornaments, shares, etc. or immoveable property.
5. Income from other sources- this head of income covers any income which is not chargeable to tax under any
of the above heads of income. Any income including gambling or profit/loss on running of horses, camels,
interest income, etc. are chargeable to tax under this head of income.

Definition of salary

Salary is the remuneration received by an individual for services rendered by him as a result of an express or implied
contract.

CHARACTERISTICS
  Before an income can become chargeable under the head ‘salaries’., it is vital that there should exist
between the payer and the payee, the relationship of an employer and an employee or
- the relationship of master and servant.
 Full time or Part time employment- it does not matter whether the employee is a full time employee or a
part time employee. Once the relationship of employer and employee exists, the income is to be charged
under the head Salaries.
 Foregoing or sacrificing of salary- once the salary accrues or becomes due, the subsequent waiver by the
employee does onot absove him from the liability of income tax.
- Voluntary foregoing (i.e. if it becomes due) is different from voluntary surrender of salaries,
which is exempted from tax. Voluntary surrender means, salary does not become due.
 Sometimes, the employer allows an employee to draw tax-free salary, i.e. employer deducts the amount of
tax from the salary and pays it directly to the department.
- The employee’s assessment is to be made not on the amount o salary he is drawing but on the
Gross Amount, i.e. Salary drawn+ tax paid by employer.
 Prequisites or benefits or any other remuneration received from persons other than the Employer, will also
be taxable but not under the head of ‘Salaries’ but under the head ‘income from other sources’, it does not
matter whether they were accrued while the employer gained such salary while discharging his normal
duties or some other duties.
 Any salary, commission or remuneration received by a working partner from a Firm/LLP shall not be taxable
under the head Salaries, but under the head Profit and Gains.
 Deductions made by the employer- if the employee recives his salary after certain deductions made by the
employer, like that of contribution to PF, tax deducted at source, the salary will not be the net amount
received, rather it will be the gross salary due to the employee.
- Gross Salary= Net salary received + Deductions made by employer

Section 15

 As per section 15 any income is chargeable to income tax under the head Salaries, if
- Due or received, whichever falls earlier
 Salary is taxable on due basis or on receipt basis, whichever is earlier.
a. Salary due in a previous year is taxable, even if it is not received.
b. Salary received in a previous year is taxable even if it is not due.
c. Arrears of salary received during the current previous year shall be taxable in the current year if not charged
to tax in an earlier previous year. (but subject to section 89(1))
NOTE- no double taxation- once salary is taxed on due or receipt basis, it will not be taxed again on
receipt/falling due, as the case may be.

SECTION 16

DEDUCTIONS

Section 16 states deductions, which are-

a. Entertainment allowance

Deduction can only be availed by a Govt. employee

- Actual amount of entertainment allowance received

- 20% of basic salary of the individual
- Rs. 5000
b. Professional tax
Professionals tax is paid by professionals, who all are doing profession of doctor, engineer, etc. it is paid by a
professional and allowed as deduction.
If professional tax is paid by an employee, then it will first be included in the salary and then allowed as a
deduction.

SECTION 17
DEFINATIONS OF SALARY

Section 17(1) gives an inclusive and not exhaustive definition of Salaries. As per this section, Salary includes-

1. Wages- wages is given to a person who does physical work

2. Salary- is given to a person who does not do physical work but applies his mind in work, i.e. by mental or
intellectual work.
3. Fees
4. Commissions
5. Pensions- is a periodical payment for past services
6. Annuity- is a annual grant made by the employer to hthe employee
7. Perquisite- Benefit given by an employer to an employee in kind, like in the form of car. Such benefit is
calculated in the terms of cash and covered under the head perquisite.
8. Gratuity- is a lumpsum payment for past services.
9. Annual bonus
10. Income from provident fund
11. Leave encashment- Money given to an employee by an employer for the leaves which the employee did not
availed.
12. Allowance- benefits in cash, like conveyance allowance, i.e. money given by an employer to an employee for
transportation purpose.
13. Awards- benefits in kind
14. RPF contribution and interest- RPF means, contribution of provident fund received from an employer.
15. Commuted Pension- when pension is commuted
16. Bonus
17. Profit in lieu of salary or in addition to salary or wages.

Leave encashment- :Leave encashment is the salary received by an individual for leave period. It is a chargeable
income whether he is a government employee or not. Under section 10(10AA) (i) there is also a provision of
exemption in case of leave encashment depending upon whether he is a government employee or other
employees.

Annuity:It is an annual income received by the employee from his employer. It may be paid by the employer as
voluntarily or on account of contractual agreement. It is not taxable until the right to receive the same arises.
Under section 56, Income Tax Act, 1961 other annuities come under a will or granted by a life insurance
company or accruing as a result of contract which comes as income under from other sources.

Gratuity: It is salary received by an individual paid by the employee at the time of his retirement or by his legal heir
in the case of death of the employee. Allowance: It is the amount received by an individual paid by his/her employer
in addition to salary. Under section 15 of the Income Tax Act, 1961 these allowance are taxable excluding few
condition where they are entitled of deduction/ exemptions.

As per Section 17(2), perquisites include-

i. Rent free accommodation

ii. Concessional rent accommodation provided by employer
iii. Any obligation of employee is met by employerany sum paid by the employer for assuarance of life of
employee. Allotment of shares by employer in ESOP/Sweat Equity Shares either at free of cost or at
concessional rate. Any other fringe benefits as may be prescribed under this Act. ‘

As per section 17(3),

i. Compensation from employer/former employer with regard to Termination or modification of the terms
and conditions of employment.
ii. Any payment due or received from any peron (may be employer) before joining or after cessation of the
employment. Any sum received under a key man Insuarance policy.

HOUSE PROPERTY
Income comes taxable under the head “Income from House Property”, if the following conditions are satisfied-

i. The property should consist of any building or land.

ii. The assesse should be owner of the property.
iii. The property should not be used by the owner for the purpose of any business or profession carried on
by him, the profits of which are chargeable to income tax.

Heads of House Property

According to Chapter 4, Section 22 - 27 of Income Tax Act, 1961 there is a provision of income under head of
house property. In every section from 22-27 there are detail specification of house property income. It is defined
as income earned by a person through his house or land.

Charging of Income Tax

Income tax is charged over the annual value to the property (i.e., building or Lands) of which Assesse is the
owner under this head although building will not include such portion which is occupied by assesse for his
Business or profession.

Necessary conditions-

1. Property must consist of any buildings with or without adjoining lands- Building-not defined- may or may
not have a roof.
Stadium-swimming pool- without roof-building
House under construction- not treated as building, until completed
Location- immaterial- in or outside India.
Land- attached to a building- used as a part of building
If land is not adjoin-not covered-under this section.
2. Assessee must be the owner of the property
Owner of HP-liable to pay tax under this head
Tenant- sublets his property- not taxable under this head, but income from other sources, since he is not the
owner

Income Comes Under Head of House Property:

Annual value of building or land owned by assessee. There is a charge on the potential of property to generate
income not on the rent received. But if property is used for making profit in business then it will be taxable
not under this head but will be taxable under head of profit in business/ profession.

Annual value of the house property:

For the purpose of section 22, annual value of any property- shall be,

a. The sum for which the property might reasonable be expected to let from year to year, or
b. If property or any part of property is let out – the actual rent received by the owner- is in excess of the sum
referred in (a.), tax will be chargeable over such higher amount received or receivable, or
c. If the property is vacant for the whole year or if the property is vacant for the part of the previous year, then
the annual value of the property will be deemed to be the amount received by the owner
-------------------

The annual value of house property has been defined as ‘the amount for which the property may reasonably be
expected to be let out for a year’.

However, if your property is let out for the whole or a part of the financial year, the gross annual value will be the
amount received during the year as a result of the letting out of the house property. This shall also exclude the rent
that the taxpayer is unable to realize in the financial year.

The following four factors have to be taken into consideration while determining the annual value:

a. Rent payable by the tenant.

b. Municipal valuation of the property.

c. Fair rental value (market value of a similar property in the same area) of the property.

d. Standard rent payable under the Rent Control Act.

Gross Annual Value: In the case of self-occupied property, the annual value is taken to be ‘nil’. In the case of
property that is rented out, the gross annual value is the municipal value, the ‘de facto rent’ (whether received or
receivable) or the fair rental value, whichever is highest. If, however, the Rent Control Act applies to the property,
the gross value cannot exceed the ‘de facto rent’ or the standard rent under the Rent Control Act, whichever is
higher.

Calculating annual value of property:

According to annual value, house property is calculated as

• Annual value of a house is zero if

-property is in the occupation of the owner for his residence for the whole year &

-if no other benefit is availed by owner from his property,

In both the above cases, the annual value of the property shall be taken as NIL,

Although these sections will not apply if,

- If house or part of house is let out for a whole or part of the year,
- Any other benefit is derived from such house by the owner.

the proportionate annual value of the period for which the house or any part thereof was in the occupation of the
owner for his own residence shall be deducted from the gross annual value. The assessee in such cases cannot claim
deduction under section 24 in excess of the annual value so determined

• The assessee occupies more than one house for his residence,

-the above exemption is applicable only to one such house at the option of the assessee.-- The annual value of the
other house or houses shall be computed as if the house or houses are let

Annual value of the property shall be Nil if

- Such house or part of such house is not let out for any part of the previous year &
- Owner derives no other benefit from such property

Will not be NIL if-

Assesse lets out his house to his employer, and employer reallots the house to him as rent free accommodaton,

• In case where the assessee has only one residential house but it cannot be occupied by the owner by reason-

- to his employment, business or profession carried out on at any other place,

- has to reside at that other place in a building not belonging to him,

the annual value of such house shall be taken to be nil,

if the house is not actually let and no other benefit is derived by the owner from such house.

Shall not be NIL if, the assessee cannot claim any deduction if he does not occupy his own residential house but
lives in the same town in a house owned by his father for the sake of personal.

This also covers a case where the assesse has more than one house for self residence purpose and

Assesse at his option can treat any one house to be self occupied and the NAV of such house shall be NIL,
Then the other house which are used for self residence shall be deemed to be let out.

Also, as per section 25A, if any amount is received from a tenant by an assesse, then such income shall be deemed to
be the income received by house property in respect of financial year in which such rent is received. Such income
shall be included under the head ‘income from house property’, whether the assesse is the owner of the property or
not in that financial year.

DEDUCTIONS

There are two deductions allowed from Net Annual Value of house property.

First is Statutory Deduction, which allows flat 30% of positive Net Annual Value.

If net annual value is negative or NIL, then such deduction is not allowed.

Deduction is not available for self occupied property, whose NAV is NIL.

This deduction is allowed to cover repair expenses of house property and similar other expenses, like insuarance
premium, rent, land revenue, depreciation of building, etc. Actual expenses incurred have no relevance for
calculating this deduction.

Section 24(b) allows deduction on interest on borrowed capital. Under this, deduction is allowed on

1- Deduction on interest payable on loan taken,

- for the purpose of – purchase, construction, reconstruction, repair or renovation of house property

- is allowable as a deduction
On DUE BASIS, i.e. even if such amount is not paid.

Deduction is only allowed after construction period is over, if house is under construction then no deduction can be
claimed for such under construction property U/s 24(b)

Also, if house is let out or is deemed to be let out, then 100% deduction is allowed. But if the house is self occupied
then Rs. 30,000 deduction is allowed if loan is taken before 1.4.1999 for the purpose of construction / acquisition /
repair or renovation or if loan is taken for the purpose of repair and renovation on or after 1.4.1999 or if loan is
taken on or after 1.4..1999 and house is not complete within 5 years.

Deduction of Rs. 2,00,000 is allowed if loan is taken on or after 1.4.1999 for the purpose of repair/construction/
acquisition. Or if Construction of house is completed within 5 years from the date of financial year in which loan is
takien.

For both the above mentioned deductions certicate from lender is necessary.

Deduction is allowed for pre-acquisition or pre construction period for

- Loan taken before purchase or before construction of house property for the purpose of purchase or
construction of house property

This deduction is allowed as deduction in five equal annual instalments starting from the year of completion of
construction/acquisition.

Pre-acquisition or pre-construction period means the period starting from the date of borrowing and ending on
March 31st immediately preceeding to the year of completion of construction/acquisition.

For example if loan is taken on 1-4-2014 for construction of a house and the construction was completed on
1.7.2016. in this case the pre-construction period shall be the period starting from 1.4.2014 and ending on
31.3.2016, i.e. previous year 2014-15 and 2015-16.
 The period from 1.4.16 to 30.6.16 shall not be included in the pre-construction period as house has been
completed in this previous year.

Tax treatment- interest for pre-acquisitio/pre-construction period shall be allowed as deduction in 5 equal
instalment starting from the previous year in which the house is acquired or the construction is completed and for
the next 4 previous years.

If a fresh loan is raised merely to repay the original loan, then interest on such fresh loan is allowed as a deduction
under this section.

Interest paid in advance is not fully deductble in one year as deduction is on accrual basis.

Heads of Income: Profit in Business/ Profession

Under the Income Tax Act, 'Profits and Gains of Business or Profession' are also subjected to taxation. The term
"business" includes any (a) trade, (b)commerce, (c)manufacture, or (d) any adventure or concern in the nature of
trade, commerce or manufacture. The term "profession" implies professed attainments in special knowledge as
distinguished from mere skill; "special knowledge" which is "to be acquired only after patient study and
application". The words 'profits and gains' are defined as the surplus by which the receipts from the business or
profession exceed the expenditure necessary for the purpose of earning those receipts. These words should be
understood to include losses also, so that in one sense 'profit and gains' represent plus income while 'losses'
represent minus income.

OR

a. Profit of any Business or Profession carried by assessee at any time during Previous Year- even if assesse has
carried on a business even for a single day during a financial year, then such income earned during that
particular day is chargeable to income tax. Even if business or profession is being carried out outside india,
then also income will be chargeable under this head. Even if any illegal business is being carried out, then
also tax is chargeable over it.
b. Partner of a firm- any interest, salary, bonus, commission or any type of remuneration due/received from
Firm.
c. Compensation due or received-
 Termination/ Modification of agreement for managing a company- to terminate a particular business or to
modify it.
 Termination/ Modification of terms of agency.-
 Vesting in Govt., management of any property/business under any law.

d. Non-Compete Fees and Exclusivity rights

Any sum received/ receivable in Cash or Kind under an agreement for-
a. Not carrying out any activity in relation to any business or profession.
b. Nto sharing nay know-how, patent, copyright, etc. and any similar right.

e. Benefits/Perquisites - In cash or kind arising from carrying on business or profession. (Such

benefit/perquisite which is given to a particular employee will be chargeable under this section and not any
other section).
f. Sum received under Keyman Insuarance Policy including bonus on such policy
g. Export incentives like
Sale of import license
Cash assistance against export
Duty drawback of Customs/Excise
Profit on transfer of duty entitlement pass book scheme
h. Income derived by trade, professional associate from Specific services, performed for its member.
i. Any sum in relation to capital asset which is allowed as deduction U/s 35AD.

Under Head of Profit in Business

• Profits and gains of assessee from any business or profession during assessment year

• Any payment or compensation due or received by a person for his services to organization as a part of his business

• Making profit in trade Income of professional or organization against services provided by that professional/
organization

• Profits on sale of a license granted under the Imports (Control) Order, 1955, (EXIM control Act, 1947)

• Cash received or due by any person against exports under government schemes

• Any benefit whether it is not in cash coming from business/ profession

• Any profit, salary, bonus or commission received by company partners

The following types of income are chargeable to tax under the heads profits and gains of business or profession:-

 Profits and gains of any business or profession

 Any compensation or other payments due to or received by any person specified in section 28 of the Act

 Income derived by a trade, profession or similar association from specific services performed for its members

 Profit on sale of import entitlement licences, incentives by way of cash compensatory support and drawback of
duty

 The value of any benefit or perquisite, whether converted into money or not, arising from business  Any interest,
salary, bonus, commission, or remuneration received by a partner of a firm, from such a firm

 Any sum whether received or receivable in cash or kind, under an agreement for not carrying out any activity in
relation to any business or not to share any know-how, patent, copyright, franchise, or any other business or
commercial right of similar nature or technique likely to assist in the manufacture or processing of good

 Any sum received under a keyman insurance policy In the following cases, income from trading or business is not
taxable under the head “profits and gains of business or profession”-

 Rent of house property is taxable under the head " Income from house property". Even if the property constitutes
stock in trade of recipient of rent or the recipient of rent is engaged in the business of letting properties on rent.

 Deemed dividends on shares are taxable under the head "Income from other sources".

 Winnings from lotteries, races etc. are taxable under the head "Income from other sources".

 Profits and gains of any other business are taxable, unless such profits are subjected to exemption.

General principals governing the computation of taxable income under the head "profits and gains of business or
profession:-

 Business or profession should be carried on by the assessee. It is not the ownership of business which is important
, but it is the person carrying on a business or profession, who is chargeable to tax.

 Income from business or profession is chargeable to tax under this head only if the business or profession is
carried on by the assessee at any time during the previous year. This income is taxable during the following
assessment year.

 Profits and gains of different business or profession carried on by the assessee are not separately chargeable to tax
i.e. tax incidence arises on aggregate income from all businesses or professions carried on by the assessee. But,
profits and loss of a speculative business are kept separately.

 Profits made by an assessee in winding up of a business or profession are not taxable, as no business is carried on
in that case. However, such profits may be taxable as capital gains or as business income, if the process of winding
up is such as to involve the carrying on of a trade.
  Taxable profit is the profit accrued or arising in the accounting year. Anticipated or potential profits or losses,
which may occur in future, are not considered for arriving at taxable income. Also, the profits, which are taxable, are
the real profits and not notional profits. Real profits from the commercial point of view, mean a gain to the person
carrying on the business and not profits from narrow, technical or legalistic point of view.

 The yield of income by a commercial asset is the profit of the business irrespective of the manner in which that
asset is exploited by the owner of the business.

 Any sum recovered by the assessee during the previous year, in respect of an amount or expenditure which was
earlier allowed as deduction, is taxable as business income of the year in which it is recovered.

Following businesses comes under the head of Profession and Business-

a. Business, which includes any trade, commerce or manufacture of any adventurn or concern in the nature
of trade, commerce or manufacture.
b. Manufacture, a change in non living physical object or article, which results in transforming of object or
article into a new and distinct onject or article. OR bringing any new object with Different chemical
composition or integral structure.
c. Profession also includes vocation like gardner, etc.
d. Illegal Business- profits of illegal business are taxable under PGBP.
e. Speculative Business- where speculative transactions is of such nature as to constitute a business, which is
distinct and separate from any business.
f. Business loss- business income include business losses provided they are of revenue nature, real losses
and which happen while doing business.

SECTION 29- HOW INCOME OF PGBP IS COMPUTED

The income referred to in section 28 shall be computed in accordance with the provisions contained in sections 30 to
43DB.

SECTION 30- RENT, REPAIRS, TAXES AND INSUARANCE FOR BUILDING USED FOR BUSINESS AND PROFESSION

If assesse is the owner , then following deductions are allowed to him-

- Revenue Repair-
- Municipal Taxes
- Insurance Premium (for insurance of building)

If assesse is a tenant, following deductions shall be allowed to him-

- Rent and following expenses if borne by him

- Revenue repairs
- Municipal taxes
- Insuarance premium for insurance of building

SECTION 31- MACHINERY, PLANT AND FURNITURE USED FOR BUSINESS AND PROFESSION

- If machinery, plant and furniture underwent repair, then its deduction is allowed.
- Insurance Premium of such plant, machinery and furniture.

SECTION 31- IF A REVENUE EXPENSE IS NOT UNDER SECTION 30 TO 36, and if that expense occurred during an
accounting year, and such expense is not a capital expense, but a revenue expense, then such expense will come
under section 37

Heads of Income: Capital Gains

Under the Income Tax Act, 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 deemed to be the income of the
previous year in which the transfer took place unless such capital gain is exempted under the prescribed exemptions.
'Capital gains' means any profit or gains arising from transfer of a capital asset. If any Capital Asset is sold or
transferred, the profits arising out of such sale are taxable as capital gains in the year in which the transfer takes
place. Capital gains is the difference between the price at which the capital asset was acquired and the price at
which the same asset was sold. In technical terms, capital gain is the difference between the cost of acquisition and
the fair market value on the date of sale or transfer of asset.

Under the existing provisions of Section 2(14), a 'capital asset' means, property of any kind held for personal use by
the assessee, whether or not connected with his business or profession, personal effects held for personal use by the
assessee or any number of his family dependent on him are excluded from the ambit of the definition of capital
asset. The only asset that is in the nature of personal effects, but is included in the definition of capital asset is
jewellery and ornaments. However, with effect from assessment year 2008-09, archeological collections, drawings,
paintings, sculptures or any work of art have also been excluded from the meaning of personal effects and transfer
of such personal effects will also attract capital gains tax. Capital Assets are of two types i.e., long term and short
term. A capital asset held for 36 months or less before it is sold or transferred.is called as a short-term capital asset
and if the period exceeds 36 months, the asset is known as a long-term capital asset. In case of shares, debentures
and mutual fund units the period of holding required is only 12 months. Transfer of a short term capital asset gives
rise to "Short Term Capital Gains" (STCG) and transfer of a long capital asset gives rise to "Long Term Capital Gains" (
LTCG). Different rates of tax apply for gains on transfer of the long term and short-term capital assets. Gains on
short-term capital asset are taxed as regular income.

Under section 2(14) of the Income Tax Act,1961 Capital Asset is defined as property of any kind held by assesse
including property held for his business or profession. It includes all type real property as well as all rights in
property. It is also defined as gains on transfer of assets in which there in no cost of acquisition like:

• Goodwill of business generated by assessee

• Tenacy rights

• Stage carriage permits

• Loom hours

• Right to manufacture

• Processing & production of any article or things

Assets Which Don't Come Under Heads of Capital Assets

According to Income Tax Act,1961 there are few assets which don't form a part of Capital Assets, which are as
follows:

 Stock of goods and raw materials used by assessee for his business or profession

 Those property which are movable like wearing apparel, furniture, automobile, phone, household goods etc. Held
by assessee. But Jewelry which is also an movable assets comes under heads of Capital Assets

 Agricultural property in India. But agriculture land coming under municipal limits (in area having population ore
than 10,000) comes under Capital Assets. Agriculture lands within 8 Km from municipal limit also comes under
Capital Assets if it is notified by the central government of India

 Agricultural property in India. But agriculture land coming under municipal limits (in area having population ore
than 10,000) comes under Capital Assets. Agriculture lands within 8 Km from municipal limit also comes under
Capital Assets if it is notified by the central government of India

 Few Gold Bonds issued by government

 Few special bonds issued by central government like Special Bearer Bonds, 1991

Transfer of Capital Assets

 Extinguishment of any rights in capital assets

 Acquisition of capital assets or rights

 Conversion of capital asset by its owner as stock in trade of his business, it may also be a term of transfer

 Transfer of immovable property under Section 53A of Transfer of Property Act, 1882
 Any transaction by which an assessee become enable to act as a member of cooperative society

 Any transaction by which an assessee acquire shares in cooperative society

Heads of Income: Other Sources

So under Section 56(2) of Income Tax Act,1962 all such income comes in this heads of income. There are following
incomes which are taxed under this heads

 Income coming as a dividend paid by a company to an assessee

 Income coming from winning in lottery, crossword puzzles, races, card games, gambling or other such sports

 Income coming as an amount received by assessee from his employer as a fund for welfare of employee

 Income as an interest on securities

 Income coming by letting on hire machinery, plant, furniture, building or other goods Income coming from
insurance policy Income from Other Sources is residual head. In general, if an income does not fall with the
classification of,

1. Salaries, or

2. Income from House Property, or

3. Profits and Gains of Business or Profession,

4. Capital Gains, or

then it shall be charged as Other Sources Income.

However, any capital gain/profit is chargeable under this head only if it is specifically made under this head, or if it
has been made taxable under any section of the Income-tax Act, without mentioning the head under which is
taxable.

Here you can find various incomes chargeable under this head & the computation thereof. Once the taxable income
under this head is calculated, it shall be added to your total taxable income.But, you can't claim deduction u/s 80C to
80U for certain incomes like winnings from lottery, horse races etc.

Income of every kind which is not excluded from the total income it's not charged to income tax from other sources.
"Income from other sources", namely: -

1. Dividend.

2. Any annuity due or commuted value of any annuity paid.

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 assesses from his employees as contributions to any provident fund or Superannuation
fund or any fund.

5. Income from machinery, plant or furniture belonging to the assesses and let on hire.
6. Any sum received under a Key man 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".

So, basically sanction issue notice 12a "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. The income chargeable
under the 'income from other sources’ shall be computed after making the following deductions:-

In the case 12a registration of interest on securities, any reasonable sum, paid by way of commission or payment to
a banker or to any other person for realizing such dividend or interest on behalf of the assesses. In the case of
income, received by the assesses from his employees as contributions to any provident fund or Superannuation fund
or any fund set up the provisions of the Employees''. In the case 80g income from machinery, plant or furniture
belonging to the assesses and the income is not chargeable to income-tax under the "Profits and gains of business or
profession. In the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and one-
third per cent of such income or fifteen thousand rupees, whichever is less. Any other expenditure (not being capital
expenditure) lay out or used wholly and exclusively for making or earning such income.