“Income from other sources” is the last head of income specified under section 14.While section 56 defines the scope of income chargeable under this head, section 57 and 58 specify the basis of computation of such income. Basis of Charge:-
Income from other sources is the last and residual head of income. It covers any income, which does not fall under any other head of income. In other words, the following conditions should be satisfied – a) There is an income
b) That income is not exempt from tax under sections 10 to 13A. c) That income is neither salary income, nor rental income from house property, nor income from business/profession, nor capital gains. If the above mentioned conditions are satisfied, income is taxable under section 56(1) under the head “Income from other sources”. Examples:-
a. Interest on bank deposits and loans.
b. Income from royalty.
c. Director’s fee
d. Agricultural income from a place outside India.
e. Insurance commission
f. Salaries payable to a Member of Parliament.
g. Interest on securities payable by a foreign government. However sub section 56(2), specifies eight types of income which are always taxable under the head “Income from other sources”: 1. Dividend.
2. Winning from lotteries, crosswords, puzzles, horse races and card games, etc. 3. Employee’s contribution towards staff welfare scheme. 4. Interest on securities.
5. Rental income of machinery, plant or furniture.
6. Rental income of letting out of plant, machinery or furniture along with letting out of building and the two meeting are not separable. 7. Receipts without consideration/Gift
8. Interest on compensation or enhanced compensation.
Detailed description of the above mentioned incomes which are taxable under the head “Income from other sources” is given below:- 1. Dividend:-
Dividend from an Indian company is not taxable in the hands of shareholders (company declaring dividend will have to pay dividend tax under section 115-O). However, deemed dividend under section 2(22) (e) from an Indian company or any dividend from a foreign company, is taxable in the hands of shareholders under the head “Income from other sources”.
2. Winning from lotteries, crosswords, puzzles, horse races and card games, etc. :- Gross winnings from lotteries, crosswords, puzzles, races including horse races (other than income from the activity of owning and maintaining race horses), card games and other games of any sort or from gambling or betting (of any nature whatsoever) are chargeable to income-tax. These incomes are taxable at a flat rate of 30 per cent (+ SC + EC +SHEC) on the gross winnings (without claiming any allowance or expenditure). Only winnings from lotteries, winnings from races, winning from races, winnings from betting, etc., are chargeable to tax. If a receipt is not “winnings”, then it is not taxable. The expression “lottery” includes winnings from prizes awarded to any person by draw of lots or in any other means which include any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game. In case of winning from lotteries or crossword, puzzle or card games, tax is deductible @30 percent on payments exceeding Rs.10,000 while in case of winning from horse races, payment exceeding Rs.5000 are subject to tax deduction at source at the rate of 30 per cent.
3. Employee’s contribution towards staff welfare scheme :- Any sum received by the assessee from his employees as contributions to any staff welfare scheme is taxable in the hands of the employer under the head “Income from other sources” (if it is not taxable as business income under section 28).
4. Interest on securities :-
Interest on debentures, Government securities/bonds is taxable under the head “Income from other sources” (if the...