ICAI Notes- Unit 5: Heads of Income | Taxation for CA Intermediate PDF Download

 Page 1


INCOME FROM OTHER SOURCES 
 
 
3.481 
 
LEARNING OUTCOMES 
UNIT – 5 : INCOME FROM OTHER SOURCES 
After studying this unit, you would be able to- 
? identify the income, which are chargeable to tax under the 
head “Income from other sources”; 
? examine the transactions of receipt of money and property 
without consideration or for inadequate consideration to 
determine whether such receipts are chargeable to tax 
under this head; 
? identify and comprehend the admissible deductions while 
computing income under this head; 
? identify and comprehend the inadmissible deductions 
while computing income under this head; 
? compute the tax on casual income by applying the rate of 
tax applicable on such income; 
? compute the income chargeable to tax under this head. 
  
© The Institute of Chartered Accountants of India
Page 2


INCOME FROM OTHER SOURCES 
 
 
3.481 
 
LEARNING OUTCOMES 
UNIT – 5 : INCOME FROM OTHER SOURCES 
After studying this unit, you would be able to- 
? identify the income, which are chargeable to tax under the 
head “Income from other sources”; 
? examine the transactions of receipt of money and property 
without consideration or for inadequate consideration to 
determine whether such receipts are chargeable to tax 
under this head; 
? identify and comprehend the admissible deductions while 
computing income under this head; 
? identify and comprehend the inadmissible deductions 
while computing income under this head; 
? compute the tax on casual income by applying the rate of 
tax applicable on such income; 
? compute the income chargeable to tax under this head. 
  
© The Institute of Chartered Accountants of India
 
 
INCOME TAX LAW 
3.482
Proforma for computation of “Income from Other Sources” 
Particulars Amt
(i) Dividend Income xxx 
(ii) Casual Income (winnings from lotteries, crossword puzzles, 
races including horse races, card games and other games, 
gambling, betting etc.)
xxx 
(iii) Consideration received in excess of FMV of shares of a closely 
held company, where such shares are issued at a premium 
[Section 56(2)(viib)] 
xxx 
(iv) Interest received on compensation/ enhanced compensation 
deemed to be income in the year of receipt [Section 56(2)(viii)] 
xxx 
(v) Advance forfeited due to failure of negotiations for transfer 
of a capital asset [Section 56(2)(ix)] 
xxx 
(vi) Sum of money or property received by any person [Section 
56(2)(x)] 
xxx 
(vii) Compensation or other payment, due to or received by any 
person, in connection with termination of his employment or 
the modification of the terms and conditions relating thereto 
[Section 56(2)(xi)] 
xxx 
(viii) Sum received, including the amount allocated by way of 
bonus, under a LIP other than under a ULIP and keyman 
insurance policy, which is not exempt u/s 10(10D) [Section 
56(2)(xii)] 
xxx 
(ix) The following income, if not chargeable under the head 
“Profits and gains of business or profession” 
 
 (a) Any sum received by an employer from his 
employees as contributions to any provident fund, 
superannuation fund or any other fund for the 
welfare of the employees 
xxx  
(b) Interest on securities xxx  
(c) Income from letting out on hire of machinery, 
plant or furniture 
xxx  
(d) Where letting out of buildings is inseparable from 
the letting out of machinery, plant or furniture, the 
income from such letting 
xxx  
© The Institute of Chartered Accountants of India
Page 3


INCOME FROM OTHER SOURCES 
 
 
3.481 
 
LEARNING OUTCOMES 
UNIT – 5 : INCOME FROM OTHER SOURCES 
After studying this unit, you would be able to- 
? identify the income, which are chargeable to tax under the 
head “Income from other sources”; 
? examine the transactions of receipt of money and property 
without consideration or for inadequate consideration to 
determine whether such receipts are chargeable to tax 
under this head; 
? identify and comprehend the admissible deductions while 
computing income under this head; 
? identify and comprehend the inadmissible deductions 
while computing income under this head; 
? compute the tax on casual income by applying the rate of 
tax applicable on such income; 
? compute the income chargeable to tax under this head. 
  
© The Institute of Chartered Accountants of India
 
 
INCOME TAX LAW 
3.482
Proforma for computation of “Income from Other Sources” 
Particulars Amt
(i) Dividend Income xxx 
(ii) Casual Income (winnings from lotteries, crossword puzzles, 
races including horse races, card games and other games, 
gambling, betting etc.)
xxx 
(iii) Consideration received in excess of FMV of shares of a closely 
held company, where such shares are issued at a premium 
[Section 56(2)(viib)] 
xxx 
(iv) Interest received on compensation/ enhanced compensation 
deemed to be income in the year of receipt [Section 56(2)(viii)] 
xxx 
(v) Advance forfeited due to failure of negotiations for transfer 
of a capital asset [Section 56(2)(ix)] 
xxx 
(vi) Sum of money or property received by any person [Section 
56(2)(x)] 
xxx 
(vii) Compensation or other payment, due to or received by any 
person, in connection with termination of his employment or 
the modification of the terms and conditions relating thereto 
[Section 56(2)(xi)] 
xxx 
(viii) Sum received, including the amount allocated by way of 
bonus, under a LIP other than under a ULIP and keyman 
insurance policy, which is not exempt u/s 10(10D) [Section 
56(2)(xii)] 
xxx 
(ix) The following income, if not chargeable under the head 
“Profits and gains of business or profession” 
 
 (a) Any sum received by an employer from his 
employees as contributions to any provident fund, 
superannuation fund or any other fund for the 
welfare of the employees 
xxx  
(b) Interest on securities xxx  
(c) Income from letting out on hire of machinery, 
plant or furniture 
xxx  
(d) Where letting out of buildings is inseparable from 
the letting out of machinery, plant or furniture, the 
income from such letting 
xxx  
© The Institute of Chartered Accountants of India
INCOME FROM OTHER SOURCES 
 
 
3.483 
(e) Any sum received under a Keyman insurance 
policy including bonus on such policy (if not 
chargeable to tax under the head “Salaries” also) 
xxx xxx 
(x) Any income chargeable to tax under the Act, but not falling 
under any other head of income 
xxx 
(xi) Deemed income u/s 59 – Remission or cessation of a trading 
liability or receipt of any amount in respect of loss or 
expenditure allowed as deduction in an earlier P.Y. 
 
 
xxx 
 xxx 
Less: Deductions allowable [Section 57]  
(a) In case of dividends or income in respect of units of 
a mutual fund or income in respect of units from a 
specified company  
-  interest expenditure allowable as deduction subject 
to a maximum of 20% of such income included in 
the total income for that year, without deduction 
under this section 
xxx  
(b) In case of interest on securities  
-  Any reasonable sum paid by way of commission or 
remuneration to a banker or any other person 
xxx  
(c) Income consists of recovery from employees as 
contribution to any PF, superannuation fund etc.  
-  Amount of contribution remitted before the due 
date under the respective Acts, in accordance with 
the provisions of section 36(1)(va) 
xxx  
(d) Income from letting on hire of machinery, plant 
and furniture, with or without building  
- current repairs to the machinery, plant, furniture or 
building 
- insurance premium 
- depreciation/unabsorbed depreciation  
xxx  
(e) Family Pension – 33-1/3% of such income or ` 15,000, 
whichever is less
xxx  
(f) Interest on compensation/enhanced compensation 
received – 50% of such interest 
xxx  
© The Institute of Chartered Accountants of India
Page 4


INCOME FROM OTHER SOURCES 
 
 
3.481 
 
LEARNING OUTCOMES 
UNIT – 5 : INCOME FROM OTHER SOURCES 
After studying this unit, you would be able to- 
? identify the income, which are chargeable to tax under the 
head “Income from other sources”; 
? examine the transactions of receipt of money and property 
without consideration or for inadequate consideration to 
determine whether such receipts are chargeable to tax 
under this head; 
? identify and comprehend the admissible deductions while 
computing income under this head; 
? identify and comprehend the inadmissible deductions 
while computing income under this head; 
? compute the tax on casual income by applying the rate of 
tax applicable on such income; 
? compute the income chargeable to tax under this head. 
  
© The Institute of Chartered Accountants of India
 
 
INCOME TAX LAW 
3.482
Proforma for computation of “Income from Other Sources” 
Particulars Amt
(i) Dividend Income xxx 
(ii) Casual Income (winnings from lotteries, crossword puzzles, 
races including horse races, card games and other games, 
gambling, betting etc.)
xxx 
(iii) Consideration received in excess of FMV of shares of a closely 
held company, where such shares are issued at a premium 
[Section 56(2)(viib)] 
xxx 
(iv) Interest received on compensation/ enhanced compensation 
deemed to be income in the year of receipt [Section 56(2)(viii)] 
xxx 
(v) Advance forfeited due to failure of negotiations for transfer 
of a capital asset [Section 56(2)(ix)] 
xxx 
(vi) Sum of money or property received by any person [Section 
56(2)(x)] 
xxx 
(vii) Compensation or other payment, due to or received by any 
person, in connection with termination of his employment or 
the modification of the terms and conditions relating thereto 
[Section 56(2)(xi)] 
xxx 
(viii) Sum received, including the amount allocated by way of 
bonus, under a LIP other than under a ULIP and keyman 
insurance policy, which is not exempt u/s 10(10D) [Section 
56(2)(xii)] 
xxx 
(ix) The following income, if not chargeable under the head 
“Profits and gains of business or profession” 
 
 (a) Any sum received by an employer from his 
employees as contributions to any provident fund, 
superannuation fund or any other fund for the 
welfare of the employees 
xxx  
(b) Interest on securities xxx  
(c) Income from letting out on hire of machinery, 
plant or furniture 
xxx  
(d) Where letting out of buildings is inseparable from 
the letting out of machinery, plant or furniture, the 
income from such letting 
xxx  
© The Institute of Chartered Accountants of India
INCOME FROM OTHER SOURCES 
 
 
3.483 
(e) Any sum received under a Keyman insurance 
policy including bonus on such policy (if not 
chargeable to tax under the head “Salaries” also) 
xxx xxx 
(x) Any income chargeable to tax under the Act, but not falling 
under any other head of income 
xxx 
(xi) Deemed income u/s 59 – Remission or cessation of a trading 
liability or receipt of any amount in respect of loss or 
expenditure allowed as deduction in an earlier P.Y. 
 
 
xxx 
 xxx 
Less: Deductions allowable [Section 57]  
(a) In case of dividends or income in respect of units of 
a mutual fund or income in respect of units from a 
specified company  
-  interest expenditure allowable as deduction subject 
to a maximum of 20% of such income included in 
the total income for that year, without deduction 
under this section 
xxx  
(b) In case of interest on securities  
-  Any reasonable sum paid by way of commission or 
remuneration to a banker or any other person 
xxx  
(c) Income consists of recovery from employees as 
contribution to any PF, superannuation fund etc.  
-  Amount of contribution remitted before the due 
date under the respective Acts, in accordance with 
the provisions of section 36(1)(va) 
xxx  
(d) Income from letting on hire of machinery, plant 
and furniture, with or without building  
- current repairs to the machinery, plant, furniture or 
building 
- insurance premium 
- depreciation/unabsorbed depreciation  
xxx  
(e) Family Pension – 33-1/3% of such income or ` 15,000, 
whichever is less
xxx  
(f) Interest on compensation/enhanced compensation 
received – 50% of such interest 
xxx  
© The Institute of Chartered Accountants of India
 
 
INCOME TAX LAW 
3.484
(g) Any other expenditure not in the nature of capital 
expenditure incurred wholly and exclusively for earning 
such income 
 
 
xxx 
 
 
xxx 
Income from Other Sources xxx 
Deductions not allowable [Section 58] 
(a) Any personal expense of the assessee. 
(b) Any interest chargeable to tax under the Act which is payable outside 
India on which tax has not been paid or deducted at source.
(c) Any payment chargeable to tax under the head “S alaries”, if it is payable outside 
India unless tax has been paid thereon or deducted at source therefrom. 
(d) 30% of sum payable to a resident on which tax is deductible at source, if 
such tax has not been deducted or after deduction has not been paid on 
or before the due date of return specified in section 139(1) . 
(e) Any expenditure in respect of which a payment is made to a related 
person, to the extent the same is considered excessive or unreasonable by 
the Assessing Officer, having regard to the FMV. 
(f) Any expenditure in respect of which a payment or aggregate payments 
exceeding ` 10,000 is made to a person in a day otherwise than by 
account payee cheque/bank draft or ECS through bank account or 
through such other prescribed electronic mode such as credit card, debit 
card, net banking, IMPS, UPI, RTGS, NEFT, and BHIM Aadhar Pay. 
Tax on Income from Other Sources 
Income Winnings from 
lotteries, 
crossword 
puzzles, races 
including horse 
races, card games 
and other games, 
gambling, betting 
etc. (other than 
winning from any 
online game) 
Unexplained 
cash credits/ 
investments/ 
money, bullion, 
jewellery etc./ 
expenditure, etc. 
Net winnings 
from online 
games 
Other 
Income 
Section Section 115BB Section 115BBE Section 
115BBJ 
-
© The Institute of Chartered Accountants of India
Page 5


INCOME FROM OTHER SOURCES 
 
 
3.481 
 
LEARNING OUTCOMES 
UNIT – 5 : INCOME FROM OTHER SOURCES 
After studying this unit, you would be able to- 
? identify the income, which are chargeable to tax under the 
head “Income from other sources”; 
? examine the transactions of receipt of money and property 
without consideration or for inadequate consideration to 
determine whether such receipts are chargeable to tax 
under this head; 
? identify and comprehend the admissible deductions while 
computing income under this head; 
? identify and comprehend the inadmissible deductions 
while computing income under this head; 
? compute the tax on casual income by applying the rate of 
tax applicable on such income; 
? compute the income chargeable to tax under this head. 
  
© The Institute of Chartered Accountants of India
 
 
INCOME TAX LAW 
3.482
Proforma for computation of “Income from Other Sources” 
Particulars Amt
(i) Dividend Income xxx 
(ii) Casual Income (winnings from lotteries, crossword puzzles, 
races including horse races, card games and other games, 
gambling, betting etc.)
xxx 
(iii) Consideration received in excess of FMV of shares of a closely 
held company, where such shares are issued at a premium 
[Section 56(2)(viib)] 
xxx 
(iv) Interest received on compensation/ enhanced compensation 
deemed to be income in the year of receipt [Section 56(2)(viii)] 
xxx 
(v) Advance forfeited due to failure of negotiations for transfer 
of a capital asset [Section 56(2)(ix)] 
xxx 
(vi) Sum of money or property received by any person [Section 
56(2)(x)] 
xxx 
(vii) Compensation or other payment, due to or received by any 
person, in connection with termination of his employment or 
the modification of the terms and conditions relating thereto 
[Section 56(2)(xi)] 
xxx 
(viii) Sum received, including the amount allocated by way of 
bonus, under a LIP other than under a ULIP and keyman 
insurance policy, which is not exempt u/s 10(10D) [Section 
56(2)(xii)] 
xxx 
(ix) The following income, if not chargeable under the head 
“Profits and gains of business or profession” 
 
 (a) Any sum received by an employer from his 
employees as contributions to any provident fund, 
superannuation fund or any other fund for the 
welfare of the employees 
xxx  
(b) Interest on securities xxx  
(c) Income from letting out on hire of machinery, 
plant or furniture 
xxx  
(d) Where letting out of buildings is inseparable from 
the letting out of machinery, plant or furniture, the 
income from such letting 
xxx  
© The Institute of Chartered Accountants of India
INCOME FROM OTHER SOURCES 
 
 
3.483 
(e) Any sum received under a Keyman insurance 
policy including bonus on such policy (if not 
chargeable to tax under the head “Salaries” also) 
xxx xxx 
(x) Any income chargeable to tax under the Act, but not falling 
under any other head of income 
xxx 
(xi) Deemed income u/s 59 – Remission or cessation of a trading 
liability or receipt of any amount in respect of loss or 
expenditure allowed as deduction in an earlier P.Y. 
 
 
xxx 
 xxx 
Less: Deductions allowable [Section 57]  
(a) In case of dividends or income in respect of units of 
a mutual fund or income in respect of units from a 
specified company  
-  interest expenditure allowable as deduction subject 
to a maximum of 20% of such income included in 
the total income for that year, without deduction 
under this section 
xxx  
(b) In case of interest on securities  
-  Any reasonable sum paid by way of commission or 
remuneration to a banker or any other person 
xxx  
(c) Income consists of recovery from employees as 
contribution to any PF, superannuation fund etc.  
-  Amount of contribution remitted before the due 
date under the respective Acts, in accordance with 
the provisions of section 36(1)(va) 
xxx  
(d) Income from letting on hire of machinery, plant 
and furniture, with or without building  
- current repairs to the machinery, plant, furniture or 
building 
- insurance premium 
- depreciation/unabsorbed depreciation  
xxx  
(e) Family Pension – 33-1/3% of such income or ` 15,000, 
whichever is less
xxx  
(f) Interest on compensation/enhanced compensation 
received – 50% of such interest 
xxx  
© The Institute of Chartered Accountants of India
 
 
INCOME TAX LAW 
3.484
(g) Any other expenditure not in the nature of capital 
expenditure incurred wholly and exclusively for earning 
such income 
 
 
xxx 
 
 
xxx 
Income from Other Sources xxx 
Deductions not allowable [Section 58] 
(a) Any personal expense of the assessee. 
(b) Any interest chargeable to tax under the Act which is payable outside 
India on which tax has not been paid or deducted at source.
(c) Any payment chargeable to tax under the head “S alaries”, if it is payable outside 
India unless tax has been paid thereon or deducted at source therefrom. 
(d) 30% of sum payable to a resident on which tax is deductible at source, if 
such tax has not been deducted or after deduction has not been paid on 
or before the due date of return specified in section 139(1) . 
(e) Any expenditure in respect of which a payment is made to a related 
person, to the extent the same is considered excessive or unreasonable by 
the Assessing Officer, having regard to the FMV. 
(f) Any expenditure in respect of which a payment or aggregate payments 
exceeding ` 10,000 is made to a person in a day otherwise than by 
account payee cheque/bank draft or ECS through bank account or 
through such other prescribed electronic mode such as credit card, debit 
card, net banking, IMPS, UPI, RTGS, NEFT, and BHIM Aadhar Pay. 
Tax on Income from Other Sources 
Income Winnings from 
lotteries, 
crossword 
puzzles, races 
including horse 
races, card games 
and other games, 
gambling, betting 
etc. (other than 
winning from any 
online game) 
Unexplained 
cash credits/ 
investments/ 
money, bullion, 
jewellery etc./ 
expenditure, etc. 
Net winnings 
from online 
games 
Other 
Income 
Section Section 115BB Section 115BBE Section 
115BBJ 
-
© The Institute of Chartered Accountants of India
INCOME FROM OTHER SOURCES 
 
 
3.485 
Tax on Income from Other Sources
Tax rate 30% of such 
winnings (further 
increased by 
surcharge, if 
applicable, and 
health and 
education 
cess@4%) 
60% of such 
income plus 
surcharge 
@25% of tax 
(Effective rate of 
tax is 78%, 
including health 
and education 
cess@4%) 
30% of such 
winnings 
(further 
increased by 
surcharge, if 
applicable, 
and health and 
education 
cess@4%) 
Normal 
rates of tax 
Other 
conditions
? No expenditure or allowance can be allowed from 
such income.
? Deduction under Chapter VI-A is not allowable 
from such income. 
? Adjustment of unexhausted basic exemption limit 
is also not permitted against such income. 
? Set-off of losses is not permissible against such 
income. 
Deductions 
specified in 
section 57 
allowable, 
subject to 
limits 
mentioned 
thereunder. 
Section 58 
specifies 
the 
deductions 
not 
allowable.  
5.1 INTRODUCTION 
Any income, profits or gains includible in the total income of an assessee, which 
cannot be included under any of the preceding heads of income, is chargeable 
under the head ‘Income from other sources’. Thus, this head is the residuary head 
of income and brings within its scope all the taxable income, profits or gains of an 
assessee which fall outside the scope of any other head. Therefore, when any 
income, profit or gain does not fall precisely under any of the other specific heads 
but is chargeable under the provisions of the Act, it would be charged under this 
head. 
 
© The Institute of Chartered Accountants of India