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Income Tax Laws – I

Notes i.e., if the employer has credited the employee’s accounts in the respective funds, (c) a sum
equal to 33-1/3% of the income or ` 15,000, whichever is less, is allowable as a deduction
from family pension; d) a deduction of a sum equal to 50% of from Interest on compensation
or enhanced compensation, and e)any other expenditure (not being in the nature of capital
expenditure) laid out or expended wholly and exclusively for the purpose of making or
earning such income.

Inadmissible deductions: The following amounts shall not be deducted in computing
income chargeable under the head ‘Income from other sources’ like (a) Any personal
expenses of the assessee, (b) Any interest chargeable under the Income-tax Act which is
payable outside India and from which, (c) income-tax has not been paid or deducted at
source, (d) Any payment which is chargeable under the head “Salaries” if it is payable
outside India unless tax has been paid thereon or deducted therefrom at source and Any
expenditure referred to in Section 40A of Income-tax Act.

The basis of charge on income by way of interest on securities is on “receipt” basis if books
of account are maintained on cash basis. If the assessee does not maintain books of account
or, when he maintains books of account on the basis of “mercantile system”, it is taxable
on “due” basis.

13.7 Keywords

Debt: An amount of money borrowed by one party from another.
Dividend: It is a payment made by a corporation to its shareholders, usually as a distribution
of profits.

Fair Market Value: It is an estimate of the market value of a property, based on what a
knowledgeable, willing, and unpressred buyer would probably pay to a knowledgeable,
willing, and unpressured seller in the market.

Gambling: It is the wagering of money or something of material value (referred to as “the
stakes”) on an event with an uncertain outcome with the primary intent of winning additional
money and/or material goods.
Interest: It is a fee paid by a borrower of assets to the owner as a form of compensation for the
use of the assets.
Provident Fund: It is a term for pension fund.
Receipt: A receipt is a written acknowledgment that a specified article or sum of money has
been received.
Securities: It is a tradable asset of any kind.

13.8 Review Questions

1. What constitutes income from other sources?
2. Discuss in detail the deductions which are available to an assessee under the head ‘income
from other sources’.
3. Define dividends.
4. Converse the cases in which payment by way of loan or advance to the amount of
accumulated profits by a closely held company is treated as dividend.
5. Prepare a list of incomes chargeable under the head “Income from other sources”.

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