Income from Other Sources

Income from Other Sources is residual head. In general, if an income does not fall with the classification of,

Advance-Tax Calculation Tax on Income from Other Sources

  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.

On this page:

Specific Charge

Besides the general charge, the following incomes are specifically made chargeable under the head "Income from Other Sources".

  1. Dividends,

  2. Winnings from lotteries, crossword puzzles,etc.,

  3. Gifts,

In addition, if the following incomes are not chargeable under the head "Salaries" or "Profits or Gains of Business or Profession", then it shall be charged as Other Sources Income.

  1. Sum received under Employees Welfare Funds,

  2. Sum received under keyman insurance policy,

  3. Interest on Securities,

  4. Income from machinery, plant or furniture, let on hire, and

  5. Income from machinery, plant or furniture, and also buildings, let on hire, if such letting of building is inseparable from the letting of the said machinery, plant or furniture.

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Winnings from Lotteries, Crossword Puzzles, Races, Etc.

Any winnings from,

  1. Lotteries,

  2. Crossword puzzles,

  3. Races including horse races,

  4. Card games and other games of any sort, or

  5. gambling or betting of any form or nature,

would be charges as "Income from Other Sources".

Lottery includes,

  1. winnings from prizes awarded to any person by draw of lots or

  2. by chance.

Card game and other game of any sort includes,

  1. any game show,

  2. an entertainment programme on television or

  3. electronic mode in which people compete to win prizes.

Note

  • No deduction is allowable in respect of any expenditure.

  • Where any income is given net of tax deducted at source, it should be grossed up for inclusion.

  • Such Gross Income is taxable at a flat rate of 30%.

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Contribution To Welfare Funds

The following is the computation of income from Contribution to Welfare Funds:

Contributions to any provident fund or super-annuation fund or any fund set up under the provisions of Employees State Insurance Act, 1948 received by the employer from his employees xxx
Less:
Such sum credited to the employee's welfare fund account on or before the due date under the respective funds. xxx
Any other Expenditure xxx
----
xxx
----
Taxable Contributions xxx
----

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Income From Letting Out Of Plant, Machinery With Or Without Building

Income from letting out of plant, machinery, furniture & fittings with or without buildings is chargeable under this head if it is not chargeable under the head "Profits and Gains of Business or Profession".

The income from letting is calculated as given below:

Income from letting out of - Plant, Machinery, Furniture & Fittings xxx
Income from letting out of - Plant, Machinery, Furniture & Fittings with Buildings inseparably xxx
----
xxx
Less:
Repairs xxx
Insurance xxx
Depreciation xxx
Any other Expenditure xxx
----
xxx
----
Taxable Hire Income xxx
----

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Keyman Insurance Policy

Any amount including bonus received under Keyman Insurance policy is chargeable under this head if it received by the family members of the employee.

It is chargeable under the head Salaries if received by employee.

It is chargeable under the head Profits and Gains of Business or Profession if received by employer.

The computation is as under: -

Amount received under Keyman Insurance Policy xxx
Less:
Any other Expenditure xxx
----
Taxable Insurance Amount Received xxx
----

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Salary And Allowance Of Members Of Parliament (MP) Or Any State Legislature (MLA) Or Any Committee (MoC)

The Salary and Allowance of MP or MLA or MoC are chargeable under the head "Income from Other Sources" and not under the head Salaries, since there is no employer-employee relationship between the payer and payee.

The computation of income is as under: -

Salary and Allowances xxx
Less: Any other Expenditure xxx
----
Net Salary and Allowances xxx
Less: - Exemption under section 10(17) xxx
----
Taxable Salary and Allowances xxx
----

The following amounts are exempt under section 10(17).

  1. Daily allowance received by MP or MLA or MoC,

  2. Any other allowance received by MP,

  3. Any constituency allowance received by any person by reason of his membership of any State Legislature.

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Income From Owning And Maintaining Race Horses

Any income from the activity of owning and maintaining race horses for running in horse races, shall be determined under the head Other Sources.

However, where such activity carried on is regular and systematic and the dominant intention is earning income from allowing it to run in races or to sell/lease the horses, the income may be charged under the head Business or Profession.

Horse Race means a horse race upon which wagering or betting may be lawfully made.

The income from such activity shall be computed as under: -

Income by way of Stake Money xxx
Less: Expenditure xxx
----
Taxable Income xxx
----

Expenditure means: -

  1. Laid out or expended wholly and exclusively for the purposes of maintaining race horses.

  2. Not being of a capital nature.

Income by way of stake money means the gross amount of prize money received on a race horse or race horses by the owner.

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Other Incomes Not Chargeable Under Any Other Head

Any amount not chargeable under any other head of income.

The computation is as under: -

Amount received/receivable xxx
Less: Expenditure xxx
----
Taxable Income xxx
----

Interest income earned from short-term deposits made by an assessee during the construction period (prior to the commencement of business) is treated as income under the head "Income from Other Sources".

However, any income earned which is directly linked and inter-connected with the construction activities, is not taxable as income and treated as abatement of cost.

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Notes on Admissible Expenditure

Any other expenditure referred to in the above computations is an expenditure: -

  1. Incurred wholly and exclusively for the purpose of making or earning any income under the head "Other Sources".

  2. Not being of a capital nature.

  3. Not being of a personal nature.

Further the following expenses are not admissible: -

  1. Interest and Salaries payable outside India on which no tax is deducted at source.

  2. Wealth-tax.

  3. Expenses referred to in section 40A.

Income from Other Sources Related Topics

Tax on Family Pension »

Tax on Gifts »

Tax on Dividends »

Tax on Interest on Securities »

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