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Thursday, 6 February 2014

Explain the term Income from other sources with examples or What are the allowable deductions from Income from other sources


Income From Other Sources :-
Any taxable income which can not be included in the previous five heads, Such as salary income from property, business or profession and capital gain is chargeable under the head “Income from other sources”.

Example :-
  1. Dividend received.
  2. Income from rented machinery plant or furniture.
  3. Royalties received by an author.
  4. Fees for technical services.
  5. Rent of ground.
  6. Any unrecovered investment & expenditure.
  7. Interest on received on various accounts like profit and loss account or saving or fixed deposits.
  8. Rent from the sub-lease land or building.
  9. Prize or prize bonds or lottery, puzzles.
  10. Sale of irrigation water for agricultural land.
  11. Income from non-professional writers.
  12. Income received as tips.
  13. Any pension or annuity.
  14. Insurance commission received by person who is not employee of insurance company.
  15. Any consideration received for the use or exploitation of property.

Following are the important examples which are not taxable under any other head but rather treated as income from other sources.

  1. Under Salaries Head Not Taxable :-
(i). Director’s fees received from company.
(ii). Tips received by waiters or servants.
(iii). Annuities granted by a life insurance company.
(iv). Examiner ship fee received by the teacher from board or university.
(v). Fee and commission not in lieu of salary.

  1. Under Income From House Property Is Not Taxable :-
(i). Rent received from a vacant plot of land.
(ii). Income received from building kept in lease.
(iii). Rent received by a tenant from sub-letting house.
(iv). Income from any building which is used for the business or profession purposes.
(v). Rent received from the grassing field.

  1. Under The Head Income From Business Or Profession Is Not Taxable :-
(i). Income of a professional examiner is not taxable under this head.
(ii). Income of non-professional writer of newspaper.
(iii). Share of good will received from the new partner by the old partners.
(iv). Examination and enrollment fee received by the bar council.
(v). Income of an expert of crossword-puzzles.
(vi). Professional dues received after the disconnection of profession.


  1. Under Capital Gains Not Taxable :-
Depreciated assets salvage value is not taxable under this head.
Income profit on sale or transfer of assets used for business or profession in respect of which depreciation is allowed under third schedule is not taxable under the head capital gains.


Deductions Allowed :-
While computing the income from other sources following deductions are allowed.
  1. Any expenditure spent exclusively for the purpose of earning such income.
  2. Depreciation allowance with a right to carry forward of unadjusted loss of such assets.
  3. Interest paid on capital borrowed to earn such income.
  4. Insurance premium paid to cover the risk, provided the income should fall under the above head.
  5. Current repair of asset, the income of such asset should be treated under the head “Income from other sources”.
  6. Initial allowance as per third schedule.

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