Income From Other Sources

Income From Other
Sources
Presented By:
Sanjul Mittal
Income From Other Sources:-
ØSection 56 to 59 of Income Tax Act, 1961 deal with this.
Ø
ØAcc to Section 56(1), income of every kind which is includible in total income under this
Act, but which is not chargeable to income-tax under any of four head, shall be chargeable to
income-tax under this head.
Ø
ØThus any income which satisfies the following two conditions will be taxed under this head-
Ø
1.Income is chargeable to tax under this Act.
2.
3.Such income is not chargeable to tax under any of four heads i.e. Income from salaries,
Income from property, Profits and gains of business or profession, Income from capital
gains.
CHARGEABILITY
1.DIVIDEND:-
under section 2(22), the following payments or distributions made by a company to its shareholders
are deemed as dividend:-
1)Any distribution of accumulated profits

2)
3)Any distribution of debentures, debentures stock or deposit certificate, whether with or without interest
4)
5)Any distribution of bonus shares made by a company to its preference shareholders.
6)
7)Any distribution made by a company to its shareholders on its liquidation
8)
9)any payment by way of loan or advance, to following:-
10)
k)A shareholder who is the beneficial owner of at least 10% equity shares of company
l)
m)Any concern(HUF, firm, company), in which such shareholder is a member or partner or has substantial
interest (beneficial owner of at least 20% profits of the concern)
Dividend does not include following:-
1)Any distribution made by company out of its accumulated profits in the event of winding up or reduction
of capital
2)
3)Any advance or loan given to a shareholder by a company in the ordinary course of its business where
money-landing is a substantial part of the business of the company.
4)
5)Any dividend paid by company which is set-off by the company against the whole or any part of any sum
previously paid by it and treated as dividend as per provision.
6)
7)Any payment made by company on purchase of its own shares.
8)
9)Any distribution of shares at the time of demerger by the resulting company to the shareholders of
demerged company.
Following are various rules relating to assessment of dividend:-
1)Basis of charge-
2)
c.Normal or Final or annual dividend
d.Interim dividend
e.Deemed dividend
f.
2)Chargeability-
The following provisions should be kept in mind while taxing the dividend in the hands of a
shareholder:-
2)
b.If dividend is declared, distributed or paid by a domestic company after march 31, 2003(or during June
1,1997 to March 31, 2002), then it is not taxable in hands of shareholder or who has a right to receive it.
Such dividend is exempt from tax u/s 10(34). On such dividend company pay dividend tax u/s 115-O.
c.
d.in case of dividend received from a non-domestic or a foreign company from which tax has been deducted at
source and such tax has not been deposited with the GOI, such dividend is chargeable to tax.
e.
f.No deduction is made in the case of dividend paid by a co-operative society.
g.
3)Place of accrual-
üas per section 9(1) (iv), dividend paid by an Indian company outside India is deemed to accrue or arise in
India.
üIf dividend is paid by a foreign company outside India is not deemed to accrue or arise in India.
üDividend from foreign company, if operating in India, is taxable in hands of non-resident only when it is
paid in India.
4) Dividend out of tax-free profits-

Dividend received by a shareholder is chargeable to tax whether it is paid by
company out of its taxable or tax free profits.
5)No deduction at source from dividend-

6)
As per section 194, no deduction shall be made in following cases:-
a)The dividend is paid by an account payee cheque.

b)
c)Any dividend which is declared, distributed or paid by a domestic company on or after 1st April, 2003.
2. WINNING FROM LOTTORIES, CROSSWORD PUZZLES, RACES AND
CARD GAMES etc.
üIncome by way of winning from lottery or crossword puzzles or horse race or card game or any other
game is subject to deduction of tax at 30% (plus surcharge, education cess and secondary and higher
education cess).
ü
üFor resident or non-resident rate of TDS is 30.9% (up to income 10.00.000) or 33.99% ( more than
10,00,000).
ü
üFor domestic company rate of TDS is 33.99%.
ü
üFor non-domestic company rate of TDS is 31.6725%.
ü
ü
3.INTEREST ON SECURITIES
4.
üSecurity is a documentary evidence of loan, rate of interest, conditions for the repayment of loan and
time of repayment is specifically and clearly noted and which is signed by debtor himself or any other
person authorized on hid behalf.
ü
üShare is not a security.
ü
üAcc to sec 2 (28-B), interest on following securities is chargeable to tax:-
a.Int on securities of Central or State Gov.
b.Int on debenture or other securities for money issued by or on behalf of- a local authority, a company or
a corporation established by Central, State or provincial Act.
Kind of securities:-
Securities
Govt. Securities Non-govt. securities
Tax-free Less-tax Tax-free Less-tax
Basic Principles:-
a.Interest on securities is chargeable to tax on receipt or on due basis.
b.Only the owner of security on the due date is chargeable to tax.
c.Interest is deemed to be earned on certain dates on which it becomes due.
d.Interest on securities is paid after deducting tax therefrom.
e.When there are two or more joint owner of a security, the payment of interest and the deduction of tax at
source shall be deemed to be in proportion of their ownership.
Securities not subjected to TDS:-

a.National development bonds.
b.Any interest payable to LIC in respect of any securities.
c.Any interest payable to General Insurance Corporation of India.
d.7-years national savings certificates.
e.6.5% Gold Bonds, 1977 or 7% Gold Bonds, 1980 held by resident and total nominal value of such bonds
did not exceed Rs. 10,000 at any time to which interest relates.
f.Notified debentures issued by any institute or authority, public sector company or any co-operative
society or bank.
4. CONTRIBUTION RECEIVED FROM EMPLOYEES
Acc to section 2(24)(x), if an assesses receives any of following amounts from his employees, he is
chargeable to tax:-
a.Contribution to an provident fund
b.Contribution to superannuation fund
c.Contribution to any fund set up under Employees’ State Insurance Act, 1948
d.Contribution to any other fund for welfare of employees.
5. INCOME FROM MACHINERY, PLANT OR FURNITURE LET ON HIRE
6. INCOME FROM COMPOSITE LETTING OF BUILDINGS, MACHINERY,

PLANT OR FURNITURE
7. RECEIPT WITHOUT COONSIDERATION

As per section 56 (2) (vi), if any sum of money exceeds Rs. 50,000 is received without any
consideration by an individual or a HUF, in any previous year from any person or persons on or after April 1,
2006, then the whole of such sum shall be taxable.
Exceptions-
a.Any sum of money received from any relative
b.Any sum of money received on occasion of marriage of individual
c.Any sum of money received under a will or inheritance
d.Any sum of money received in contemplation of death of payer
e.Any sum of money received from any fund or foundation of university or other educational institutions or
hospital or other medical institution.
f.Any sum of money received from any trust or institution.
g.
8. INTEREST ON KISAN VIKAS PATRA
9. INTEREST ON INDIRA VIKAS PATRA
10. INTEREST ON NATIONAL SAVINGS CERTIFICATES
11. INTEREST ON SOCIAL SECURITY CERTIFICATE

Besides these income, the following income are also chargeable to income-tax
under ‘Income from other sources’:-
1)Agricultural income received from outside India
2)Interest on securities of foreign Government or authority
3)Salaries due to a member of Parliament
4)Compensation received for use of business assets
5)Any fee, commission, reward or other remuneration received by an employee from a person other than his
employer, e.g., examination remuneration received by teacher, tips received by a waiter etc.
6)Income from sub-letting of property
7)Royalties or rent of mines received or receivable by owner of a coal mine
8)Income from fisheries
9)Amount received for loss of income from land
10)Interest other than interest on securities such as int. on loan, on bank deposit and on provident fund etc
11)Int. on employee’s contribution to unrecognized provident fund
12)Gratuity received by director, who is not employee of company
13)Income of cricket players who have been selected to play for India. Following rules are applicable:-
n.
o.25% of income received from cricket Control Board of India for test matches played in India
p.50% of income received for matches played outside India
q.Income from other matches played in India is tax-free if income is received from Cricket Control Board of
India.
r.
32)Interest earned by a company on deposits during pre-production period
33)Director’s fee or salary to a director employee
34)Rent received from leasing out the trademark
35)Income from buster lands
36)Income from units of Unit Trust of India.
37)Int. on securities issued by a private body, institution or authority.
25)
26)
THANK YOU

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Income From Other Sources

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Income From Other

1)Any distribution of accumulated profits

4) Dividend out of tax-free profits-

5)No deduction at source from dividend-

a)The dividend is paid by an account payee cheque.

Govt. Securities Non-govt. securities

Tax-free Less-tax Tax-free Less-tax

Securities not subjected to TDS:-

5. INCOME FROM MACHINERY, PLANT OR FURNITURE LET ON HIRE

6. INCOME FROM COMPOSITE LETTING OF BUILDINGS, MACHINERY,

7. RECEIPT WITHOUT COONSIDERATION

9. INTEREST ON INDIRA VIKAS PATRA

10. INTEREST ON NATIONAL SAVINGS CERTIFICATES

11. INTEREST ON SOCIAL SECURITY CERTIFICATE

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