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What income
would fall under the head "income from other sources"?
Income of every kind, which is not chargeable to income tax under the
heads 1) salary 2) income from house property, 3) profits and gains of
business and profession, and capital gains can be taxed under the head "income
from other sources". However such income should also not fall under
income not forming part of total income under the IT Act.
The following income shall be chargeable to income tax under the head "Income
from other sources", namely: -
1. Dividend;
2. Any annuity due or commuted value of any annuity paid under section
280D.
3. Any winning from lotteries, crossword puzzles, races including horse
races, card games and other games of any sort or from gambling or
betting of any form or nature whatsoever.
4. Any sum, received by the assessee from his employees as
contributions to any provident fund or Superannuation fund or any fund
set up under the provisions of the Employees State Insurance Act, 1948
(34 of 1948), or any officer fund for the welfare of such employees, if
such income is not chargeable to income-tax under the head "Profits
and gains of business or profession";
5. Income from machinery, plant or furniture belonging to the assessee
and let on hire, if the income is not chargeable to income -- tax under
the head "Profits and gains of business or profession";
6. Where an assessee lets on hire machinery, plant or furniture
belonging to him and also buildings, and the letting of the buildings is
inseparable from the letting of the said machinery, plant or furniture,
the income from such letting, if it is not chargeable to income tax
under the head "Profits and gains of business or profession."
7. Any sum received under a Keyman insurance policy, including the sum
allocated by way of bonus on such policy, if such income is not
chargeable to income tax under the heads "Profits and gains of
business and profession" or under the head "Salaries".
(Keyman insurance policy means a life insurance policy taken by a person
on the life of another person who is/ was the employee of the 1st
mentioned person or who is/was connected in any manner whatsoever with
the business of the 1st mentioned person.)
So, basically "income from other sources" is the residuary
head of income, which takes within its ambit any income, which does not
specifically fall under any other head of income.
If certain Income is not chargeable to tax under the specific head,
can it be taxed under the head "Income from other sources"?
If a receipt falls under one of the specific heads of income, then such
receipt can be taxed only in accordance with the provisions relating to
that head. Income of every kind, which is not chargeable to income tax
under the heads 1) salary 2) income from house property, 3) profits and
gains of business and profession, and capital gains can be taxed under
the head "income from other sources". However, this is subject
to the condition that such income does not fall under income, not
forming part of total income under the IT Act and provided that it is
not exempted from taxation under any provision of the I-T Act.
Is the dividend income of all assessees liable to tax?
There are certain assessees who are exempted in respect of the
taxability of dividend income and therefore, dividend income in the
hands of these particular assessees, to the extent as specified in the
section, is not taxable even though the same falls under the head "Income
from other sources". The dividend income, earned by the following
entities or institutions, is exempt from tax, namely:
1. Local Authorities.
2. An approved scientific research association.
3. A venture capital fund or venture capital company from investments
made by way of equity shares in a venture capital undertaking.
4. Notified news agency.
5. Pension fund set up by LIC or any other insurer approved by the
Controller of Insurance or Insurance Regulatory and Development
Authority
6. Fund established for the welfare of employees.
7. Trust or society approved by Khadi and Village Industries
Commission.
8. An authority whether known as Khadi and Village Industries Board or
any other name for the development of Khadi and Village Industries.
9. Any body or authority established, constituted or appointed under
any enactment for the administration or public, religious, or charitable
trusts or endowments or societies for religious or charitable purposes.
10. SAARC Fund for Regional Projects.
11. Secretariat of Asian Organization of Supreme Audit Institutions.
12. Insurance Regulatory and Development Authority.
13. Any person, receiving income on behalf of specified national funds,
approved public charitable institutions, educational institutes, and
hospital.
14. Mutual funds registered under SEBI Act or set up by a public sector
bank or a public financial institution or authorized by the Reserve Bank
of India. However, w.e.f. 1.4.20003, income from units of the UTI and
mutual funds will also be taxed.
15. Investor Protector Fund. Synonym
16. Credit Guarantee Fund Trust thesaurus
17. Infrastructure capital fund.
18. Statutory provident funds, Recognized provident funds, Approved
Superannuation funds, approved gratuity funds, and approved coal mines
provident funds.
19. Registered Trade Unions or association of Registered Trade Unions.
20. Employees State Insurance Fund.
21. Members of a Scheduled Tribe, residing in Manipur, Nagaland,
Tripura, Arunachal Pradesh, Mizoram and Ladakh.
22. Statutory Corporation or a body/ institution financed by the Govt.,
formed for promoting the interest of Scheduled castes/tribes, minority
community.
23. Co-operative societies formed for promoting the interest of
Scheduled castes/tribes.
24. Marketing authority, engaged in letting godowns and warehouses.
25. Certain Commodity Boards/ Authorities.
26. Political parties.
Would the interest income be assessed as 'business income' or as
'income from other sources'?
Interest Income is either assessed as 'Business Income' or as 'Income
from other sources' depending upon the activities carried on by the
assessee. If the investment yielding interest is part of the business of
the assessee, the same would be assessable as 'business income' but
where the earning of the interest income is incidental to and not the
direct outcome of the business carried on by the assessee, the same is
assessable as 'Income from other sources'. Business implies some real,
substantial and systematic or organized course of activity with a profit
motive. Interest, generated from such an activity, is business Income;
else it would be interest from other sources.
What are the deductions allowed under the head 'Income from other
sources'?
The income, chargeable under the head 'income from other sources,'
shall be computed after making the following deductions:
- In the case of interest on
securities, any reasonable sum, paid by way of commission or
remuneration to a banker or to any other person for the purpose of
realizing such dividend or interest on behalf of the assessee;
- In the case of income, received by
the assessee from his employees as contributions to any provident
fund or Superannuation fund or any fund set up under the provisions
of the Employees'' State Insurance Act, 1948, or any other fund for
the welfare of such employees, which is chargeable to income tax
under the head "Income from other sources" deductions so
far, as may be in accordance with provisions of S 36(1) (va).
- In the case of income from
machinery, plant or furniture belonging to the assessee and let on
hire, if the income is not chargeable to income -- tax under the
head "Profits and gains of business or profession or where an
assessee lets on hire machinery, plant or furniture belonging to him
and also buildings, and the letting of the buildings is inseparable
from the letting of the said machinery, plant or furniture, the
income from such letting, if it is not chargeable to income tax
under the head "Profits and gains of business or profession",
deductions, so far as may, be in accordance with the provisions of
clause (a), clause (3)of Section 30, Section 31, and subsections (1)
and (2) of Section 32 and subject to the provisions of S 38.
- In the case of income in the nature
of family pension, a deduction of a sum equal to thirty three and
one third per cent of such income or fifteen thousand rupees,
whichever is less.
- Any other expenditure (not being
capital expenditure) laid out or used wholly and exclusively for the
purpose of making or earning such income.
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