Income from Other Sources

Following incomes are taxable under this head:

1. Salary received by an MP / MLA / MLC are taxable under this Head. Allowances received by them
are fully exempted
2. Income received by Assessee from a person other than employer e.g. A college teacher received
remuneration from University for paper checking or earns income by writing a book.
3. Family Pension is taxable under this head
From this a standard deduction u/s 57 (iia) is given @ 1/3 rd of family pension Or Rs 15000 w.e.less
4. Income from Sub-letting
5. Income (Revenue) from Land (excluding Indian Agricultural income). Agricultural income from
outside India is taxable
6. Composite Rent
7. Royalty income
8. Director fee or Sitting fee received for attending Board meeting
9. Tips received by waiter or taxi driver from customers
10. Interest on Bank deposits (including co-operative banks)
Bank is required to deduct Tax at Source @10% if interest on Fixed Deposit exceeds Rs. 40000 (Rs.
50000 in case of senior citizen).
11. Interest on all types of deposits with Post office is taxable.
Note: Interest on Post Office Saving Bank Account is exempted upto Rs 3500 in case of single holder
and upto Rs 7000 in case of Joint Holder
12. Interest on deposit with Firm is taxable under this head
Firm is required to deduct Tax at Source @10% if interest exceeds Rs 5000
13. Pension received from a person other than employer is taxable
14. Dividend: Dividend (on equity or preference shares) from Indian company is Taxable.
Dividend or Final Dividend is taxable in the year when declared or received, which ever is earlier.
Interim Dividend is Taxable in the year in which it is received.
Domestic company is required to deduct Tax at source @ 10% if amount of Dividend payable to an
individual is more than Rs. 5000. But Taxable is Gross amount of Dividend.
Note: If shares are held as investment then Dividend is Taxable U/h Other Sources. If Shares are held
by a Trader as Stock of business then Dividend received is Taxable u/h Business and Profession.
Dividend received (net) from foreign company is fully taxable Dividend from UTI is also Taxable.
Dividend from co-operative society is taxable

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 15. Advance money forfeited due to non transfer of capital asset is also taxable under this head
16. Casual Income:
Income of non-repetitive nature or Unexpected income, a type of wind fall gain. e.g.
Winning from lotteries Winning from cross word puzzle
Winning from races including horse race Winning from card game
Winning from TV game shows Winning from gambling and betting

The paying authority is required to deduct tax at source @30% if winning amount in more than Rs
10000 from lottery, horse race, crossword puzzle, T V game show.
No TDS from Gambling, betting and other races winning amount. #But taxable is Gross amount won
and not the Net amount Received
e.g. Mr. X received Rs. 140000 as Lottery winning amount. It means Net received = 140000
:. Gross Won = Net received x 100 / 70
:. = 140000 x 100 / 70
= Rs. 200000 = Taxable

e.g. Mr. X Won Rs. 140000 from Lottery

It means he won 140000 = Gross = taxable
In this case he will receive 140000 – TDS @30%
140000 – 42000 = 98000

Also note that there is no deduction u/s 80 from Casual Income

This income is taxable at flat rate of 30%. Limit of 250000 or 300000 or 500000 will not be checked
in case of this income.
No loss is allowed to be adjusted against this income.

17. Income from maintenance of horses for race purposes is taxable.

18. Interest on Securities

i.e. Interest on Bonds, Debenture or Security
Interest on security does not accrue on day to day basis. It accrues and becomes due on a fixed
particular date. The person holding security on that fixed particular date will get interest for the full
period irrespective of the fact that he kept these securities only for part of the period
e.g. Mr X invested in 8% Rs. 50000 Securities on 5/11/2020. Interest on these securities accrues and
becomes due on 31/12 each year.

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 So in this example Mr X will get interest for full period during 2020-21 as he had these securities on
due date i.e. 31/12
So Mr x wiii get 8% of 50000 =4000 and this is taxable

e.g. Mr X invested in 8% Rs. 50000 Securities on 5/11/2020. Interest on these securities accrues and
becomes due on 30/6 and 31/12 each year.
So in this example Mr X will get interest for half period during 2020-21 as he had these securities on
due date i.e. 31/12 and he was not having these securities on 30/6..
So Mr x wiii get (8% of 50000)1/2 = 2000 and this is taxable

e.g. Mr X invested in 8% Rs. 50000 Securities on 5/11/2020. Interest on these securities accrues and
becomes due on 30/6 each year.
So in this example Mr X will not get interest for the period during 2020-21 as he was not having these
securities on due date i.e. 30/6
So Mr x wiii get zero interest during 2020-21

Rates of TDS
 Security issued by Government @ nil

 Security issued by Semi Govt or Local authorities like Municipal Corporations or by any other Govt
or private sector corporation or company ( listed or not listed) @10%

Types of Security
a) Tax Free Government Security: interest on this is fully exempted i.e. Not taxable
b) Tax Free Commercial Security or Tax Free Security:
In this case full interest written on the face of security is sent to security holder. Tax on that is paid by
the issuing authority. So for security holder not only interest received is taxable, tax paid by issuing
authority is also taxable .
So Grossing up of interest is required.
e.g. Mr. X invested in 9% Rs. 80000 Tax Free Securities on 16/7/2020. Interest on these securities
accrues and becomes due on 31/12 each year.
So in this example Mr. X will get interest for full period during 2020-21 as he had these securities on
due date i.e. 31/12
So Mr X wiii get 9% of 80000 =7200 = Net received But Taxable is Gross = Net received x 100 / 90
= 7200 x 100/90 = 8000 =Gross = Taxable

e.g. Mr. X received Rs 5400 as interest on Tax free debentures of a company

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 Net received =5400

So gross Taxable = 5400 x 100/90 = 6000

So we Note that in case of Tax Free securities whether Rate of Interest is mentioned or Amount of
Interest received is mentioned, Grossing Up is done in all cases.

c) Less Tax Commercial Security or Less Tax Security or Security :

In this case tax is deducted from the internet and balance is sent to security holder. In this case if rate
of interest is known then no need to gross up but if amount of interest received is known then
grossing up is required.
Note: If this is not mentioned, whether security is Tax Free or Less Tax then it is Less Tax Security.

e.g. Mr. X invested in 9% Rs. 80000 Less Tax Securities on 16/7/2020. Interest on these securities
accrues and becomes due on 31/12 each year.
So in this example Mr. X will get interest for full period during 2020-21 as he had these securities on
due date i.e. 31/12
So Gross Interest = 9% of 80000 =7200 is Taxable In this case TDS will be @10% of 7200 =720
Mr. X will receive 7200 – 720 = 6480, but taxable is gross = 7200

e.g. Mr. X received Rs 5400 as interest on Debentures of a company Net received =5400
So gross = 5400 x 100/90 = 6000 = Taxable
So we Note that in case of LESS TAX SEcurities if Rate of Interest is mentioned then no need to
gross up but if Amount of Interest received is mentioned, Grossing Up is done.

No tax at source is deducted from interest on following securities ( Interest is fully taxable)

• National Defence Bonds, National Development Bonds

• National Saving Certificate

• security issued by co-op society

• security issued by Govt.

• security issued by a co. Which is listed and is in D-mat form

• security issued by a Co in which public is substantially interested and is listed and interest

is upto Rs 5000 paid by account payee cheque to resident.

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 Interest on following is fully exempted from tax

• 7% Capital Investment Bonds

• National Relief Bonds

19. Gifts

Following Gifts received are not taxable:

• from any relative

• at the time of marriage

• under will or by way of inheritance

• on death of the payer

• from local authority

• from university etc

• from Trust

Other than above, gift received by an Assessee during RPY are taxable as per following rules and
categories:

(A) if aggregate Gifts received in Cash / Bank / NSC exceed Rs 50000 then whole such
amount is taxable

(B) (1) Assessee has received immovable property without any consideration. If value of
any of that immovable property exceed Rs 50000 then full value of that property is taxable

(B) (2). Assessee has received immovable property with inadequate consideration. If

benefit of any such immovable property is more than Rs 50000 then full benefit from that is taxable

(C) (1). Assessee has received movable property without any consideration. If aggregate

value of all these received during the year exceed Rs 50000 then whole is taxable

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 (C) (2). Assessee has received movable property with inadequate consideration. If aggregate value of
benefit from all these exceed Rs 50000 then total benefit is taxable.

Note:
 Movable property include Shares and Securities, Jewellery, Archaeological collections, Drawings,
Paintings, Sculptures, Any work of Art, Bullion. It does not include Car, Furniture, household
equipments, Clothes etc
 Relative include Spouse of the individual, Brother and Sister of the Individual, Brother and Sister of
the spouse of the individual, Brother and Sister of either of the Parents of the individual, Any lineal
ascendant or descendant of the individual, Any lineal ascendant or descendant of the spouse of the
individual, Spouse of all above.

Deductions From Income u/h Other Sources

1. Standard Deduction from Family Pension received 1/3 rd of family pension

Or Rs 15000
w.e.less is deducted
2. Interest on loan
Loan taken to invest somewhere. Rule is, if income from that source is taxable under this head then
interest on loan is allowed to be deducted, whether income was there in the year or not.

e.g. Mr. X took loan of Rs. 60000 on 1/9/2020 @8%pa to invest in 12% Debentures of a company.
Interest on Debentures accrues and becomes due on 31/12 each year.
Solution: For PY 2020-21

Interest on Debentures 12% of 60000 = 7200

Less Interest on loan (From 1/9/2020 to 31/3/2021)

For PY 2020-21 for 7 months = 8% of 60000 x 7 / 12 = 2800

Therefore Taxable Income 4400

e.g. say in the above example interest on debentures accrues and becomes due on 30/6 and 31/12 each
year.
Solution: in this case Mr. x will get interest of Dec 2020 only and not of 30/6/20 as he purchased
Debentures after 30/6/2020.
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 Interest on Debentures of 31/12 only = 7200 / 2 = 3600
Less Interest on loan = 2800

Therefore Taxable Income 800

e.g. say in the same above example interest on debentures accrues and becomes due on 30/6 each
year.
Solution: In this case Mr. x will not get interest during 2020-21 as he purchased Debentures after
30/6/2020.
Interest on Debentures = NIL

Less Interest on loan = 2800

Therefore Taxable Income -2800

NOTE : Above rule is not applicable in case loan was taken to Invest in shares. If Dividend Income is
there, then only deduction of interest on loan is allowed to be deducted and this deduction cannot be
more than 20% of Taxable Dividend Income.

3. Any other expenditure incurred to earn income of this head is allowed to be deducted on
actual basis

From Composite Rent ----------

Less. Actual Repair Exp

• Actual Legal Charges

• Actual Collection charges

• Depreciation as per rules

# Any expenditure incurred to earn exempted income is not allowed to be deducted.

# Commission paid at the time of buying and selling of shares or security or any other asset is not allowed to
be deducted.
# From Dividend income only interest on loan is allowed to be dducted. Any other Expenses incurred to earn
Dividend Income is not allowed to be deducted u/h Other Sources.
# Expenses incurred to earn Casual income is not allowed to be deducted. e.g. Mr. X purchased Lottery
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 tickets for Rs. 20000. One ticket got him a Prize of Rs. 50000. So Taxable is 50000.
# If Assessee is maintaining own horses for race purposes then expenses incurred on maintenance of these
horses is allowed to be deducted from the income of these horses only.