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    Document 20

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    Kavya Gopal

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    \ Chapter 8 INCOME FROM OTHER | SOURCES [Sections 56-59] Sgghens 56-59 of the Income Tax Act, 961 deals with the PrOVisiorg Felating to “Income from other sources”. \Every income which dogs . specifically fall under any of the precedingvour heads shall be ing Ide in this head. his head is, thus, a ‘residuary’ head of income. There arb two types of incomes which are included under this heag Income from other sources: 1, Specific income u/s 56(2) 2. General Incomes u/s 56 (1) "| SPECIFIC INCOMES INCLUDED UNDER INCOME FROM OTHER SOURCES SECTION 56(2) As per Section 56 (2), the specific incomes includes the following: 1, Dividends from Co-operative societies and foreign companies; 2. Interest on securities, if not charged to tax under the head “profit and gains of business or profession”. 3. Winnings from lotteries, crossword puzzles, races including-ho Taces, card games and other games of any sort, or from gambling * betting of any form of nature whatsoever; and 4 Any sum received by the assessee from his employees ® contribution to any provident fund or any other welfare fund for employees provided it is not taxable under the head ‘Profits . cee of — or Profession”. | te . me ‘Tom machinery, plant or furniture belonging ' assessee and let on hire, provided the income is not chargeable " 202 203 from other Sources (Sections 56-69) one tro O spoome-tX under the head profits and gains of business or i an assessee lets on hire, the machinery, plant or furniture woe to him and also buildings, and letting of buildings, Is pelonging nq of the said machinery, plant or inseparable from the letting of UM it is not charge able to furniture, the income from such letting, if it is paneer jncome-tax_ under the head profits and gains 0 fession. tals : 7 sum received under a Keyman Insurance Policy, including the sum allocated by way of bonus on such policy, if such income is not taxable under the head “Salaries” or “Profits and gains of business or profession”. : Any sum of money exceeding Rs. 50,000 received without consideration by an individual or a Hindu undivided family from any person on or after 31st August 2004, subject to certain exceptions [Section 56[2](v}]. GENERAL INCOMES U/S 56(1) | following are some of the other incomes, which are normally chargeable to tax under this head because these are not covered under any of the four specified heads: Income from sub-letting of a house property by a tenant; L 2. Casual income; 3. Insurance commission; 4. Family pension (payments received by the legal heirs of a deceased employees); 5. Director's sitting fee for attending board meetings; 6. Interest on bank deposits. Deposits with companies; 7. Interest on loans; 8. Income from undisclosed sources: a. Unexplained cash credits (Sec. 68) b. Unexplained Investments (Sec. 69) c. Unexplained money (Sec. 69 A) d. Unexplained expenditure (Sec. 69C) ©. Amount borrowed or repaid on Hundi otherwise than through : an account payee cheque. i Femuneration received by Members of Parliament. | 1 Reon on ae of co-operative society, foreign governments; ership fees received by a teacher from an instituti = ion than his employer; 204 Income Tay: Theory Lay a A 12. Total interest till date on employee's Contriby unrecognized provident fund at the time when on 6 lump sum amount from the unrecognized Provident tung Oey ® 13. Rent from a vacant piece of plot of land Saye 14. Agricultural income from agricultural land situate outsig, 15. Interest received on delayed refund; © India 16. Income from royalty, if it is not income from business OF prof 17, Director's commission for standing as a guarantor to banker, 18. Gratuity commission for underwriting shares of a new compa 19. Gratuity received by a director who, under the Televant cont, not an employee or servant of the company, is assessayj & income from other sources. a 20. Income from racing establishment 2:1. Income from granting of mining rights 122. Income from markets, fisheries, rights of ferry or moorings; 23. Income from grant of grazing rights 24. Interest paid by the Government on excess Payment of advance ta, etc; 25. Interest paid by the Government on excess Payment of advance ta, etc; 26. Income received after discontinuance of business’ 27. Receipts by cricketers selected to Play for India. ) TAXABILITY OF DIVIDEND [SECTION 56(2) (1)] Dividends can be of three types: 1. Dividends declared by a domestic company 2. Dividends or any other income distributed by UTI 3. Dividends delayed by a Foreign company a. Any Dividend declared, distributed or paid by a domest company (interim or final dividend) on or after 1-4-2008 shal be exempted b. Since dividends Teceived from a domestic company a exempt, no deduction of an allowed such dividends 'y expenses shall be c. Dividend from a foreign co i ciety, ae mMpany, co-operative so deemed dividend shal be fully taxable under this heed d. Income / divi - be mone dividend from units of UTI or Mutual Fund shall n° - eomorner SOM Sections 56-69) ces ( ) a oF INCOME FROM UNITS [SECTION 10(35)] MP a seam by way of income received in respect of any nts fro the Administrator of the specified undertaking, or me ified company, or ~ Mutual Fund shall be exempt. ON FOR EXPENSES FROM DIVIDEND INCOME AND INTEREST uct oe gcURITIES [SECTION 57 [I] AND 57(III)] 1 collection Charges: Any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realizing the dividend and interest. . Interest on loan: Interest on money borrowed for purchasing the shares and investment in securities can be claimed as deduction. Any other expenditure: Any other expenditure, not being an expenditure of a capital nature, expended wholly and exclusively for the purpose of making or eaming such income, can be claimed as deduction. OTHER DEDUCTIONS U/S 57 1. In respect of income from machinery, plant or furniture etc. belonging to the assessee and let on him. a. Amount paid on account of current rep: machinery, plant or furniture b. Premium paid in Tespect of insurance against risk of damage or destruction thereof. c. Depreciation in respect of building, airs to the premises, machinery, plant or furniture | : 2. In respect of family pension received by widows or legal heirs of deceased employees. A standard deduction of @ Rs.15,000 whichever is less 1s sum equal to 33%% of such pension or allowed as deduction. Expenses not deductible 1. Any personal expenses of the assessee 2. Any interest payable outside India 3. Any expenses or losses in connection with casual incomes 4 Income tax / wealth tax paid ne IMeOAME TAX: Theory, tay ae WINNING FROM LOTTERIES, CROSSWORD PUZZLES, Hose ha AND CARD GAMES [SECTION 56(2) (18)] CE Any winnings from. \ mehiding harse races rd games and other games of any sort Gambling or betting of any form or nature Whatsoever chargeable to tax “Income from other sources a Gi de a be As per Section 58/4), no deduction in respect of any expenditure allowance in connection with such income shall be allowed ® deduction. The entire income of winnings, without any expenditure allowance will be taxable. TAX DEDUCTED AT SOURCE [SECTION 194 B] 1. Winning from lotteries, crossword puzzles, etc.: a. Rate of TDS if prize amount is more than Rs.5,000. b. Tax @ 30% + Surcharge + Education Cess Plus SHEC @ 3% c No TDS if pnze amount is less than Rs. 5,000. Note: Surcharge @ 10% if total income of the assessee exceeds Rs. 10,00,000 * No surcharge if total income does not exceed Rs. 10,00,000. * Education cess @ 3 %. Grossing up: Grossing up is required to be done if the ‘net winning ® given as under. Thus, grossing up will be equal to: Mt waedeg eo eon 100 - 30 + (surcharge + Education Cess) Note: grossing i qe aed Up is registered, if the amount won is given and a?" winnings are less than Rs. 5,000 a Rate of TDs if ; Rate of TDs if winnings are more than Rs. 2,500. SNe ToS ot + Surcharge + Education Cess (2 Se) + SHEC| winning is less than Rs.2,500 190 —F sources ( from other income crossing up: 207 (Sections 56-69) surcharge @ 10% of tax if total income exceeds Rs.10,00,000 Education cess @ 3% inni i ne as { net winnings are given gross winnings will be dor under: 100 Note: ee 100 - 30 + (surcharge + Education Cess) i 7 if the No grossing up is required, if the amount won is given and also if winnings are less than Rs. 2,500. Winnings from other races, gambling as betting: "As no tax is required to be deducted, there is no difference between net and gross amount. Income from the activity of owning and maintaining Horses for race purposes: a. Income arising from maintenance of horses for race purposes 1s taxable income from other sources. b. Loss arising from activity of maintenance of race horses can be set off only from income from such sources as stake money and not any other income. c. Any unadjusted loss from the activity of maintenance of tacehorses can be carried forward for 4 succeeding years to be set off only from the same activity. INTEREST ON SECURITIES [SECTION 56(2) (ID)] Income by way of interest on Securities is chargeable under the head aC “income from other sources”, if such income is not char ‘geable to income tax under the head, “profits and gains of Business or Profession”. 1 2 3. According to Section 2(28B) “interest on securities” means: Interest on any security of the central or a st; ‘ate Interest on debentures or other securities Sememment, authority ssued by a local Interest on debentures issued by a com foreign); and Pany (whether Indian Interest on debentures or other securities , or corporation. Issued by a Statutory yme Tax: Th nie Income Tax: Theory L2W and Prag Grossing up of Interest: Tax is also to be deducted at source on interest on securities at the prescribed rates of taX- Tax is charged on the gross amount of interes, If net interest 1S grossed up to arrive at the taxable amount. Net interest can be Gr ossed Up as under: Netinterst 799 — rate of TDS Note: overnment (Central or State = Grossing up is government) securities as = Grossing up is required in the case of = Tax-free non-Government securities Less-Tax non-Government securities not required in the case of G there is no TDS. Rates of TDS ies listed in a recognized stock 1, Incase of Non-Government securiti licable plus Education cess @ exchange 10% plus surcharge as app! 3 — 20%) plus surcharge as 3%. 2. Un listed Non-Government securities applicable plus Education cess @ 3%. Note: = Surcharge @ 10% of tax for compat = Surcharge @ 10% of tax for indivi does not exceed Rs. 10,00,000 Rate of TDS for Bank Interest (Exceeding Rs. 10,000 ) : if total income is less than Rs.10 Lakhs: 10% + Education cess 3 (no surcharge). If total income is more than Rs. 10 Lakhs: 10 % + surcharge e@ i ie + Education cess @ 3% terest on company deposits eedin: : a. Listed Company @ 10% ae ee b. Unlisted Company @ 20% ny or firm assessee, idual and HUF provided total income No Tax Deducted At Source (TDS) There is no TDS for following cases: 209 me from Other Sources (Sections 56-69) we , Interest on Government Securities. Debentures of a public company. : Debenture interest paid by the company through account payee cheque, In case of winnings from betting. Interest on Units of UTI and Mutual fund. Deemed dividend. Bank interest credited paid up to Rs. 10,000. Interest paid to an individual in an account payee cheque for an amount not exceeding Rs.2,500. 9. Horse Race winnings if it is upto Rs, 2,500, 10. Winnings from lotteries, puzzle, card games if upto Rs. 5,000. Exempted Interest on Securities Section 10(15) ProOaL These are some securities, deposits whose interest is exempted from tax u/s 10(15). They are: 12 year National Savings Annuity Certificates, Treasury Savings Deposit Certificates. . Post Office cash certificates, . National plan certificates (10 years). . National plan savings certificates (12 years). Post Office national savings certificates. - Post Office Savings Bank Accounts. . Post Office Cumulative Time Deposits. Public Account of Post office savings account {interest upto Rs.5,000). 10. Scheme of Fixed Deposits governed by the Government Savings Certificates. 11. National Defence Gold Bonds 1980 or Gold Deposit Bonds 1999, 12. Special Bearer Bonds 1991. 13. 2% Capital Investment Bonds. 14. 9% National Relief Bonds. 1S. 12-Year National Savings Annuity Certificates. CON MAPONe Interest on securities is exempt to certain category of persons (Sections 10, 11 & 13 A) Interest on securities is exempt from tax u/s 10,11 and 134 if Securitieg are held by 1. Local Authority [Section 10(20)). income Tax: Theory, Law and Practice 210 ‘i 10(21)]. Approved Scie! h Association [section Any Regimental Fund or Non-Public Fund{[section OT Any Institution existing solely for the development di or Village industries [Section 10(23B)]- : 5. Authority established for the development of Khadi and Village ‘dustries [Section 10(23BB))- : aS ee constituted administrauion of Public Religious 6. Any body or authori Trusts or Endowments [Section 1012386

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