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Unit 13: Income from Other Sources

The incomes which are neither covered under the head salary, house property, business income Notes
or capital gains shall be taxable under head Income from other sources. This head of income is
a residual head because it covers all other incomes which are uncovered and which are not
exempt from tax.

13.1 Income Chargeable under the Head “Income from Other

Sources”

Income chargeable under Income-tax Act, which does not specifically fall for assessment under
any of the heads discussed earlier, must be charged to tax as “income from other sources”. This
head is thus a residuary head of income under which income can be computed only after deciding
whether the particular item of income is otherwise assessable under any of the first four heads.
In addition to the taxation of income not covered by the other heads, Section 56(2) specifically
provides certain items of incomes as being chargeable to tax under the head in every case.

Such incomes are:
1. Dividends [Section 56(2)(i)]: Current profit would be part of accumulated profits but
subsidiary on capital account cannot be treated as accumulated profits.

2. Keyman Insurance policy: Amount received under a Keyman insurance Policy, including
bonus on each Policy, if it is not taxable under any other head of income.
3. Winnings from lotteries [Section 56(2)(ib)]: Any winnings 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.

Did u know? Winnings from lotteries, cross-word puzzles, races, (including horse races),
card games and other games of any sort or from gambling or betting of any form or nature
whatsoever, are specifically chargeable to tax as income from other sources even if the
assessee deriving such income claims to carry on any trade or adventure in these activities
as part of his business.
The entire income of winnings, without any expenditure or allowance or deductions
under Sections 80C to 80U, will be taxable. However, expenses relating to the activity of
owning and maintaining race horses are allowable. Further, such income is taxable at a
special rate of income-tax i.e., 30% + surcharge + cess @ 3%.
4. Contribution to Provident fund: Income of the nature referred to in Section 2(24)(x)
(relating to certain contributions to any provident fund or superannuation fund or any
fund set up under the provisions of the ESI Act or any other fund for the welfare of such
employees received by the assessee from his employees in his capacity as an employer)
will be chargeable to income-tax under the head “income from other sources” if such
income is not chargeable to income-tax under the head “profits and gains of business or
profession”. But if the employer deposits such amount on or before due date of deposit
applicable for such contribution, he will be allowed a deduction on account of the same.

5. Income by way of interest on securities: If the income by way of interest on securities is not
chargeable to income-tax under the head ‘Profits and gains of business or profession’.
6. Income from hiring machinery etc. [Section 56(2)(ii)]: 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”.

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