Income from Other Sources Tax
Understanding the head of Income from Other Sources is residuary in nature. It includes incomes which are not taxable in other heads of income.
Income from Other Sources is one of the heads of income chargeable to tax under the Income tax Act. 1961. Any income that is not covered in the other four heads of income is taxable under income from other sources, because of this, it is known as residuary head of income. All the incomes excluded from salary, capital gains, house property or business & profession (PGBP) are included in IFOS, except those which are exempt under the Income Tax Act.
Section 56- Incomes taxable only in Income from Other Sources are
- Dividend Income;
- Income earned from winning lotteries, crossword puzzles, races (including horse race), gambling or betting of any kind;
- Money or movable/immovable property received without consideration or inadequate consideration during previous year;
- Interest on compensation or enhanced compensation received;
- Advance money received or money received in negotiation for transfer of a capital asset (only if the money is forfeited and it doesn't result in the transfer of such asset).
Incomes taxable under IFOS, only if not taxable under Profits and Gains of Business or Profession (PGBP):
- Any sum contributed towards provident funds, ESI, etc. by employee to the employer, only if not deposited in the relevant fund;
- Interest earned on Securities;
- Income received from the letting of a plant, machinery or furniture, with or without building.
Incomes taxable under IFOS, only if not taxable under PGBP or Salaries:
- Keyman Insurance Policy;
- Salary of MP/MLA.
Income Computation and Disclosure Standards: Section 145 states that Income from Other Sources must be computed on the regular accounting methods followed by the assessee. It can be either cash or mercantile system of accounting. The Central Government has notified Income Computation and Disclosure Standards to be followed while computing the income.
Section 57- Expenditures allowed as deductions
- Expenses incurred for realisation of dividend or interest income;
- Deductions to the extent amount remitted within due date are authorised in respect to contribution towards funds for the welfare of employees;
- Family Pension- deduction is allowed to the extent of 33-1/3% of pension or Rs. 15000 whichever is less;
- Deductions for current repairs, insurance and depreciation, will be allowed for income earned by way of lease rental;
- A deduction equal to 50% will be allowed for interest received on compensation or enhanced compensation
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