Description
A resource is a source or supply from which benefit is produced. Typically resources are materials, money, services, staff, or other assets that are transformed to produce benefit and in the process may be consumed or made unavailable.
INCOME FROM OTHER SOURCES –Sec 56
Any income which is not chargeable to tax under Section 15, 22, 28, or 45, will be chargeable to tax as Income from Other Sources (IFOS) i.e. any income not taxable under the head Income from Salary, House Property, Business/Profession or Capital Gains, is chargeable to tax as Income from Other Sources. Section 56 (2): Under Section 56 (2), the items that are mentioned as taxable under this head are as follows:1. Dividend from shares of a Foreign Company or from shares of a CoOperative Society. [Dividend from shares of an Indian Company is exempt from tax by virtue of section 10 (34.] 2. Winnings from Lotteries, Puzzles, Crosswords, Card games, any other game of any sort, Races including Horse Races or from Betting or Gambling. (Only Winnings from such activities and not business income generated out such activities. For e.g.: Income from Agency Commission on selling of Lottery Tickets will not be taxable as IFOS, but will be separately taxable as income from Business /Profession).Tax rate@30% 3. Interest on Securities if Securities are held as Investment and not as Stock-in-trade. (If they are held as Stock-in-Trade, then interest therefrom will be chargeable to tax as income from Business or Profession and not as income from Other Sources). 4. Rent from Letting out of Plant & Machinery, Furniture.
5. Composite Rent (Combined Rent) from Letting out of Building, along with Plant & Machinery or other assets. For e.g.: Composite rent from letting out of a Cinema Building together with chairs, projectors and other furniture will be entirely chargeable as income from Other Sources.
6. Any sum received as contribution by assessee from his employee towards any Staff Welfare Scheme. Initially when an employer receives any contribution from his employees towards any Staff Welfare Scheme, it becomes an income in his hand and later on when he deposits such sum in the respective fund, it is allowed as a deduction to him from his income.. 7. Any sum received under a ‘Keyman Insurance Policy (KIP)’ including any Bonus therein if not taxed under Profits and Gains of Business and Profession. 8. Any Gift in cash (only cash and no other asset whether moveable or immoveable) exceeding Rs. 50,000/- received by an Individual or a Hindu Undivided Family on or (after 01-06-2006 However, following receipts of cash shall not be regarded as an income: (a.) Cash received from any person on occasion of Marriage (only Marriage and no other function like Birthday Party or Engagement), (b.) Cash received in contemplation death of the donor, (c.) Cash received under a Will or Inheritance, (d.) Cash received from a Relative. For e.g.: Mr. A received Rs. 51,000/- from his friend Mr. X on 12/09/2006, then entire amount of Rs. 51,000/- (and not only the amount in excess Rs. 50,000/-) will be chargeable to tax in the hands of Mr. A, under the head Income from Other Sources. NOTE: (1.) One shall keep it in mind that all the incomes discussed above, will be taken as income from other sources only when the same is not taxable under any of the other four heads of income, except of Dividend income and Winnings from Lotteries, Puzzles, Card Games, Gambling, Betting, etc. Dividend and Winnings are always taxable as Income from Other Sources, irrespective of the business of the assessee. (2.) All those incomes, which are chargeable to tax as income from Other Sources, are chargeable to tax either on ‘Due’ basis or on
‘Receipt’ basis, depending upon the method of accounting regularly followed by the assessee, except of ‘Dividend’ income. Dividend income is always chargeable to tax on ‘Due’ basis, irrespective of the method of accounting followed by the assessee. OTHER INCOMES CHARGEABLE UNDER THIS HEAD: 1. 2. 3. 4. Interest on Bank Fixed Deposits and Loans given. Royalty income. For e.g.: Royalty received for writing Books. Director’s Sitting fees. Rent from Letting out of a vacant Plot of Land. (Only from a vacant Plot of Land without having any Building constructed thereon, if Building is also present, then such rent would be chargeable to tax as income from House Property and not as income from Other Sources) 5. Ground Rent received. 6. Agricultural income received from an Agricultural Land situated outside India. 7. Amount received under Family Pension. (Subject to Standard Deduction U/S 57, which will be lower of 1/3rd of such Family Pension or Rs.15,000/-) (‘Family Pension’ is an monthly/periodical pension received by Family Members of a deceased Employee after his/her death) 8. Income from Subletting of a House Property. (Rent received from Letting out of a House Property is chargeable to tax as income from House Property, whereas rent received from Subletting of a House Property is chargeable to tax as income from Other Sources) (‘Subletting’ means letting out of a property by Tenant of that property or by a person who is not an owner of that property) 9. Salary received by Members of Parliament. (Though it is called as ‘Salary’, such remuneration is not chargeable to tax as ‘Salary’ because Members of Parliament are not treated as Government Servant. They do not have any employer and due to lack of employer-employee relationship, their remuneration can not be charged to tax as ‘Salary’) 10. Income on any Investment. 11. Interest on Income Tax Refund. However, the Income Tax refund is not an income of the assessee, therefore, it is not taxable.
12. Honorarium received for lecture conducted, received from College, University, Institute, etc. 13. Deemed Dividend u/s 2(22)(a) to section 2(22)(e). PERMISSIBLE DEDUCTIONS FROM INCOME FROM OTHER SOURCES: Section 57: The following Deductions are permissible under the head Income from Other Sources (IFOS): (1.) Section 57(1): Commission or Remuneration paid for realizing Dividend or Interest on Securities/Investments. (2.) Section 57(1)(a): Deduction in respect of Employees’ Contribution towards Staff/Employees’ Welfare Scheme, provided that the contribution is credited to the fund before the due date of filing the Income Tax Return by Employer. (3.) Section 57(2): Repairs and Depreciation in case of letting out of the Plant and Machinery, Furniture, Building. Insurance Premium on the Building, Plant and Machinery and on the Furniture are allowed to be deducted. (4.) Depreciation as per Section 32: Depreciation as per section 32 of the Act, is allowed to be deducted from Income from Other Sources, provided income generated out of that asset is chargeable to tax as Income from Other Sources. (5.) Section 57(2)(a): Standard Deduction in case of Family Pension allowed to be deducted at either Rs. 15,000/- or 1/3rd of Family Pension received, whichever is less, in the hands of the person who is in receipt of the amount under Family Pension. (6.) Section 57(3): Any other expenses for earning income from Other Sources is allowed to be claimed as deduction if, such: (a.) Expense is incurred wholly and exclusively for earning the income. (b.) Expense is not a Capital Expenditure. (c.) Expense is not a Personal expenditure. (d.) Expense is incurred in the Previous Year.
# List of incomes exempted from tax under section 10 from this head(IFOS): 1. Section 10(1): Agricultural income from Agricultural Land in India. 2. Section 10(11): Interest or any Amount due from Public Provident Fund. 3. Section 10(12): Any amount due from Provident Fund A/C. 4. Section 10(13): Any amount due from an Approved Super annuation Fund. 5. Section 10(15): Any Interest on Post Office Saving A/c or from notified Securities. 6. Section 10(17): Allowances to MLA or MP. 7. Section 10(17A): Any Award received from Central/State Government. 8. Section 10(34): Any Dividend received from an Indian Company 9. Section 10(35): Any income(Dividend,Interest) from units of a Mutual Fund. 10. Section 10(10D): An amount received from Life Insurance Policy including any Bonus therein, issued by any Insurance Company in India. Problem 1:Ramesh received following income during the year 2008-09 :Compute his annual taxable income. a. Bank Interest – 1. ICICI Bank 5400 2. Axis Bank 3480 3. Janata Co-operative Society 6250 b. Interest on Debentures 4200
c. Dividend Income4. XYZ Limited(Indian Company) 2500 5. ABC Limited (Foreign Company)1400 d. Family Pension Solution 1: 36000
Assesse-Ramesh Previous Year-2008-09 Assessement Year-2009-10 Computation of Income from other sources: Bank Interest – 6. ICICI Bank 5400 7. Axis Bank 3480 8. Janata Co-operative Society 6250 Interest on Debentures Dividend IncomeXYZ Limited Less:Exempt ABC Limited Rs.
15130 4200
2500 2500 Nil 1400
1400
Family Pension 36000 Less-Deduction = 12000 (36000*1/3=12000 or 15000 whichever is lower) Total Income from other sources
24000
44730
Problem 2: Mohan earned following income during the year 2008-09 : Compute his annual taxable income. a. Rental Income – i. Furniture ii. Machinery b. Lottery Winning c. Royalty Income – Books
12000 3480 50000 36000
Solution 2:
Assesse- Mohan Previous Year-2008-09 Assessement Year-2009-10 Computation of Income from other sources: Rental Income – i. Furniture ii. Machinery Lottery Winning Royalty Income – Books Rs.
12000 3480 50000 36000
15480 50000 36000
Total Income from other sources
101480
doc_860892435.docx
A resource is a source or supply from which benefit is produced. Typically resources are materials, money, services, staff, or other assets that are transformed to produce benefit and in the process may be consumed or made unavailable.
INCOME FROM OTHER SOURCES –Sec 56
Any income which is not chargeable to tax under Section 15, 22, 28, or 45, will be chargeable to tax as Income from Other Sources (IFOS) i.e. any income not taxable under the head Income from Salary, House Property, Business/Profession or Capital Gains, is chargeable to tax as Income from Other Sources. Section 56 (2): Under Section 56 (2), the items that are mentioned as taxable under this head are as follows:1. Dividend from shares of a Foreign Company or from shares of a CoOperative Society. [Dividend from shares of an Indian Company is exempt from tax by virtue of section 10 (34.] 2. Winnings from Lotteries, Puzzles, Crosswords, Card games, any other game of any sort, Races including Horse Races or from Betting or Gambling. (Only Winnings from such activities and not business income generated out such activities. For e.g.: Income from Agency Commission on selling of Lottery Tickets will not be taxable as IFOS, but will be separately taxable as income from Business /Profession).Tax rate@30% 3. Interest on Securities if Securities are held as Investment and not as Stock-in-trade. (If they are held as Stock-in-Trade, then interest therefrom will be chargeable to tax as income from Business or Profession and not as income from Other Sources). 4. Rent from Letting out of Plant & Machinery, Furniture.
5. Composite Rent (Combined Rent) from Letting out of Building, along with Plant & Machinery or other assets. For e.g.: Composite rent from letting out of a Cinema Building together with chairs, projectors and other furniture will be entirely chargeable as income from Other Sources.
6. Any sum received as contribution by assessee from his employee towards any Staff Welfare Scheme. Initially when an employer receives any contribution from his employees towards any Staff Welfare Scheme, it becomes an income in his hand and later on when he deposits such sum in the respective fund, it is allowed as a deduction to him from his income.. 7. Any sum received under a ‘Keyman Insurance Policy (KIP)’ including any Bonus therein if not taxed under Profits and Gains of Business and Profession. 8. Any Gift in cash (only cash and no other asset whether moveable or immoveable) exceeding Rs. 50,000/- received by an Individual or a Hindu Undivided Family on or (after 01-06-2006 However, following receipts of cash shall not be regarded as an income: (a.) Cash received from any person on occasion of Marriage (only Marriage and no other function like Birthday Party or Engagement), (b.) Cash received in contemplation death of the donor, (c.) Cash received under a Will or Inheritance, (d.) Cash received from a Relative. For e.g.: Mr. A received Rs. 51,000/- from his friend Mr. X on 12/09/2006, then entire amount of Rs. 51,000/- (and not only the amount in excess Rs. 50,000/-) will be chargeable to tax in the hands of Mr. A, under the head Income from Other Sources. NOTE: (1.) One shall keep it in mind that all the incomes discussed above, will be taken as income from other sources only when the same is not taxable under any of the other four heads of income, except of Dividend income and Winnings from Lotteries, Puzzles, Card Games, Gambling, Betting, etc. Dividend and Winnings are always taxable as Income from Other Sources, irrespective of the business of the assessee. (2.) All those incomes, which are chargeable to tax as income from Other Sources, are chargeable to tax either on ‘Due’ basis or on
‘Receipt’ basis, depending upon the method of accounting regularly followed by the assessee, except of ‘Dividend’ income. Dividend income is always chargeable to tax on ‘Due’ basis, irrespective of the method of accounting followed by the assessee. OTHER INCOMES CHARGEABLE UNDER THIS HEAD: 1. 2. 3. 4. Interest on Bank Fixed Deposits and Loans given. Royalty income. For e.g.: Royalty received for writing Books. Director’s Sitting fees. Rent from Letting out of a vacant Plot of Land. (Only from a vacant Plot of Land without having any Building constructed thereon, if Building is also present, then such rent would be chargeable to tax as income from House Property and not as income from Other Sources) 5. Ground Rent received. 6. Agricultural income received from an Agricultural Land situated outside India. 7. Amount received under Family Pension. (Subject to Standard Deduction U/S 57, which will be lower of 1/3rd of such Family Pension or Rs.15,000/-) (‘Family Pension’ is an monthly/periodical pension received by Family Members of a deceased Employee after his/her death) 8. Income from Subletting of a House Property. (Rent received from Letting out of a House Property is chargeable to tax as income from House Property, whereas rent received from Subletting of a House Property is chargeable to tax as income from Other Sources) (‘Subletting’ means letting out of a property by Tenant of that property or by a person who is not an owner of that property) 9. Salary received by Members of Parliament. (Though it is called as ‘Salary’, such remuneration is not chargeable to tax as ‘Salary’ because Members of Parliament are not treated as Government Servant. They do not have any employer and due to lack of employer-employee relationship, their remuneration can not be charged to tax as ‘Salary’) 10. Income on any Investment. 11. Interest on Income Tax Refund. However, the Income Tax refund is not an income of the assessee, therefore, it is not taxable.
12. Honorarium received for lecture conducted, received from College, University, Institute, etc. 13. Deemed Dividend u/s 2(22)(a) to section 2(22)(e). PERMISSIBLE DEDUCTIONS FROM INCOME FROM OTHER SOURCES: Section 57: The following Deductions are permissible under the head Income from Other Sources (IFOS): (1.) Section 57(1): Commission or Remuneration paid for realizing Dividend or Interest on Securities/Investments. (2.) Section 57(1)(a): Deduction in respect of Employees’ Contribution towards Staff/Employees’ Welfare Scheme, provided that the contribution is credited to the fund before the due date of filing the Income Tax Return by Employer. (3.) Section 57(2): Repairs and Depreciation in case of letting out of the Plant and Machinery, Furniture, Building. Insurance Premium on the Building, Plant and Machinery and on the Furniture are allowed to be deducted. (4.) Depreciation as per Section 32: Depreciation as per section 32 of the Act, is allowed to be deducted from Income from Other Sources, provided income generated out of that asset is chargeable to tax as Income from Other Sources. (5.) Section 57(2)(a): Standard Deduction in case of Family Pension allowed to be deducted at either Rs. 15,000/- or 1/3rd of Family Pension received, whichever is less, in the hands of the person who is in receipt of the amount under Family Pension. (6.) Section 57(3): Any other expenses for earning income from Other Sources is allowed to be claimed as deduction if, such: (a.) Expense is incurred wholly and exclusively for earning the income. (b.) Expense is not a Capital Expenditure. (c.) Expense is not a Personal expenditure. (d.) Expense is incurred in the Previous Year.
# List of incomes exempted from tax under section 10 from this head(IFOS): 1. Section 10(1): Agricultural income from Agricultural Land in India. 2. Section 10(11): Interest or any Amount due from Public Provident Fund. 3. Section 10(12): Any amount due from Provident Fund A/C. 4. Section 10(13): Any amount due from an Approved Super annuation Fund. 5. Section 10(15): Any Interest on Post Office Saving A/c or from notified Securities. 6. Section 10(17): Allowances to MLA or MP. 7. Section 10(17A): Any Award received from Central/State Government. 8. Section 10(34): Any Dividend received from an Indian Company 9. Section 10(35): Any income(Dividend,Interest) from units of a Mutual Fund. 10. Section 10(10D): An amount received from Life Insurance Policy including any Bonus therein, issued by any Insurance Company in India. Problem 1:Ramesh received following income during the year 2008-09 :Compute his annual taxable income. a. Bank Interest – 1. ICICI Bank 5400 2. Axis Bank 3480 3. Janata Co-operative Society 6250 b. Interest on Debentures 4200
c. Dividend Income4. XYZ Limited(Indian Company) 2500 5. ABC Limited (Foreign Company)1400 d. Family Pension Solution 1: 36000
Assesse-Ramesh Previous Year-2008-09 Assessement Year-2009-10 Computation of Income from other sources: Bank Interest – 6. ICICI Bank 5400 7. Axis Bank 3480 8. Janata Co-operative Society 6250 Interest on Debentures Dividend IncomeXYZ Limited Less:Exempt ABC Limited Rs.
15130 4200
2500 2500 Nil 1400
1400
Family Pension 36000 Less-Deduction = 12000 (36000*1/3=12000 or 15000 whichever is lower) Total Income from other sources
24000
44730
Problem 2: Mohan earned following income during the year 2008-09 : Compute his annual taxable income. a. Rental Income – i. Furniture ii. Machinery b. Lottery Winning c. Royalty Income – Books
12000 3480 50000 36000
Solution 2:
Assesse- Mohan Previous Year-2008-09 Assessement Year-2009-10 Computation of Income from other sources: Rental Income – i. Furniture ii. Machinery Lottery Winning Royalty Income – Books Rs.
12000 3480 50000 36000
15480 50000 36000
Total Income from other sources
101480
doc_860892435.docx