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INCOME UNDER THE HEAD OTHER SOURCES
Basis OF Charge [Section 56]
1. Any income which is not charged under any other head is charged under this head.
2. Following incomes are always charged under this head.
a) Gifts;
b) Dividend;
c) Lottery, Betting, Gambling or any other casual income.;
d) Rent of Plant & machinery;
e) Income from owning and maintaining race horses.
f) Family pension less (1/3rd or ₹ 15,000/25,000 - whichever is lower).
g) Maturity proceeds of keyman insurance policy Received by Legal Hier.
h) Interest On Securities / Bank Deposits
Security Held As SIT Income Under The head PGBP
Security Held As Investment Income Under The head Other Sources
Interest on Post Office Savings Bank A/c up to Rs. 3,500 in case of Individual A/c; &
Up to Rs. 7,000 in case of Joint A/c is exempt as per section 10(15).
i) Director’s Fee
j) MP’s/MLA’s salary
k) Rent from vacant land
l) Income from sub letting
m) Income from letting of building along with P&M or Furniture, if such letting is
inseparable.
n) Royalty
o) Examinership remuneration
p) Insurance commission
q) Agricultural income from agricultural land situated outside India
r) Interest on delayed refund of income tax
Casual Incomes [Section 115BB]
• Taxable @ 30% + SC (if any) + 4% HEC on tax u/s 115BB
• No deduction for any Expenditure incurred shall be allowed.
• No Deduction under chapter VI-A Shall be allowed and also no loss is allowed to be
adjusted with this income.
• Rebate u/s 87A is allowed from Tax on casual Income
• Adjustment of unexhausted Basic Exemption Limit is also NOT ALLOWED
• GROSSING UP of Winning from Lottery/Interest on securities:
If Net Amount is given, it shall be grossed up. Tax will be levied on Gross Income.
Gross Amount = Net Amount ÷ [1 – Tax Rate]
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Interest On Enhanced Compensation
• Taxable in PY of Receipt;
• 50% of Receipt is Deductible u/s 57.
• Hence only 50% amount shall be chargeable to tax.
Taxability Of Gift
• Any gift or benefit arising from business or profession shall be taxable under head
PGBP
• Any gift received by EE from ER shall be taxable under head Salaries.
• Other Gifts are taxable as follows:
A. Money Gift
Aggregate Money Gift Received Exceeds Rs. 50,000
Yes No
Entire Gift Is Taxable Not Taxable
B. Gift Of Movable Property
i. Without Consideration
Aggregate FMV Exceeds Rs. 50,000
Yes No
Entire Gift Is Taxable Not Taxable
ii. Inadequate Consideration
Aggregate of (FMV – Consideration Paid) Exceeds Rs. 50,000
Yes No
Aggregate (FMV – Consideration Paid) is taxable Not Taxable
Movable Property Includes
a) Shares & Securities e) Painting
b) Jewellery including Bullion f) Drawing
c) Archaeological collection g) Any Work Of Art
d) Sculptures h) Virtual Digital Asset
Note: If asset gifted is not a capital asset, then it shall not be taxable in the hands of
recipient.
Example: Gift or Rural agricultural land shall not be taxable as it is not a capital asset.
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C. Gift Of Immovable Property
i. Without Consideration
SDV Exceeds Rs. 50,000
Yes No
Entire Gift Is Taxable Not Taxable
ii. Inadequate Consideration
SDV Exceeds 110% Of Consideration Paid
&
(SDV – Consideration Paid) Exceeds Rs. 50,000
Yes No
(SDV – Consideration Paid) is taxable Not Taxable
Note: amount of gift taxable is included in COA of asset received in Gift.
Exceptions
1. Received under a will or inheritance.
2. Received on the marriage of individual.
3. Received from any relative
4. Received in contemplation of death of the payer.
5. Received from registered charitable institute reg u/s 12ab, hospital, medical institutions,
university or educational institution reg u/s 10(23c).
6. Received from any local authority u/s 10(20).
Meaning Of Relatives
A. For Individual
i. Spouse of the Individual
ii. Brother/sister of the Individual
iii. Brother/sister of Spouse of Individual
iv. Brother/sister of either of Parents of the Individual
v. Lineal Ascendant/Descendant of the Individual.
vi. Lineal Ascendant/Descendant of Spouse of the Individual
vii. Spouse of any of the persons referred earlier
B. For HUF – Members of HUF are Relatives.
Family Pension
After the death of employee, employer may pay some pension to family member of the
employee which is called ‘Family Pension’.
It is taxable under the head other sources but as per section 57 deduction is allowed equal
to 1/3rd of such pension but maximum ₹15,000 [25,000 in default regime]
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Exemption in Respect of Family Pension
1. Family Pension received by widow or children or nominated heirs, of a member of
armed forces (including para-military forces) of the union, where death of such
member has occurred in the course of operational duties is exempt
2. Family pension received by any member of family or individual who have been in the
service of central or state govt. and have been awarded any notified gallantry awards is
exempt.
Dividend
1. Received from domestic company – Fully Taxable
2. Received from Foreign Company – Fully Taxable.
3. Dividend Includes Deemed dividend u/s 2(22) (a) to (e)
Note: Expenses Incurred for earning dividend shall not be allowed except Interest on
loan subject to maximum 20% of dividend Income.
Section 2(22)(a)
Distribution by Company to Shareholder which Releases Company’s Asset shall be deemed
dividend to the extent of accumulated profits including capitalized Profits.
Example
A Ltd. Distributed silver coins Gift of 15,00,000 on occasion of Diwali
Compute deemed dividend if Accumulated profits (a) 25,00,000 (b) 12,00,000
Section 2(22)(b)
If any company has distributed Debentures / Deposit certificates to shareholders or bonus
shares to preference shareholders it will be considered to be dividend but only to the
extent of accumulated profits including capitalized profits
Section 2(22)(c)
If any company has distributed any amount to its shareholders in connection with its
liquidation, it will be considered to be dividend but only to the extent of accumulated
profits and any excess over it shall be considered to be full value of consideration as per
section 46 and capital gains shall be computed accordingly.
Example
A Ltd went into liquidation on 15/7/24 on which Accumulated Profits was ₹ 15,00,000 and
Capitalized profits was ₹ 5,00,000.
Mr. J Hold 5000 shares in A Ltd which is equivalent to 10% ownership in A Ltd.
Mr. J purchased 5000 share on 15/9/23 for ₹ 50/share.
On 12/12/24 After paying off all the liabilities, A Ltd. distributed ₹ 5,00,000 to Mr. J
Show tax implication.
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Section 2(22)(d)
Any distribution to its shareholders by a company on the reduction of its capital, to the
extent to which the company possesses accumulated profits
Section 2(22)(e)
Distribution of Accumulated Profits by Closely Held company by way of ADVANCE/LOAN to
(i) Shareholders beneficially holding at least 10% equity shares in the company;
(ii) Any person on behalf of such shareholders/for benefit of such shareholder;
(iii) Any CONCERN in which such shareholder has substantial interest;
(iv) Any CONCERN in which such shareholder is member/partner.
Exception:
Money lending is substantial business of company & loan is given in ordinary course
Section 2(22)(f)
Any amount received by shareholder on buyback will be treated as Deemed Dividend
regardless of quantum of accumulated profits of the company [w.e.f. 01/10/2024]
Buy Back Of Shares
By Other Than Domestic Company By Domestic Company
Shall be Taxable in the
hands of Shareholder Under Before 23/7/2024 On or After 23/7/2024
the head capital gains in the
year in Which shares were
Company is liable to pay Treatment 1
purchased by the company
additional tax @ 20% Such buy back shall be treated as deemed
plus surcharge @ 12% & dividend u/s 2(22)(f) in the hands of
hec @ 4%. income shareholder irrespective of
arising to shareholder accumulated profits.
on such buy back shall be
exempt. Treatment 2
FVC of shares shall be considered as nil
and hence capital loss shall arise to
shareholder under the head capital gain
shall be allowed to set-off as per rules of
set off.
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Particulars
No of shares of A Ltd bought in 2020 By Mr B @ ₹ 40 per share 100
Total cost of acquisition (100 x ₹ 40) ₹ 4,000
No of shares bought back in November 2024 by A Ltd @ ₹ 60 per share 20 shares
Income taxable as deemed dividend u/s 2(22)(f) ₹ 1,200
[₹ 60 per share x 20 shares]
Long-Term Capital Loss on such buyback as per Section 46A (Value of ₹ 800
consideration - COA) {Nil – (₹ 40 x 20 shares)}. Such LTCL can be set-off
against other LTCG or it can be carried forward to the next year for set-
off against other LTCG.
No of shares sold in December 2025 by Mr B @ ₹ 70 per share 50 Shares
Chargeable LTCG in PY 2025-26 after set-off of Long-Term Capital Loss ₹ 700
(₹ 1,500 – ₹ 800)
Life Insurance Policies Maturity Proceeds (Sec. 10(10D))
a) Maturity Amount Received at the time of Death
Fully exempt in the hands of recipient as per Section 10(10D)
b) Otherwise
i. For Policies issued before 1/4/2023
Maturity amount received by assessee shall be exempt u/s 10(10D) if premium paid
is up to 10% / 15% / 20% (as the case may be) of the capital sum assured
ii. For Policies issued on or after 1/4/2023
Maturity amount received by assessee shall be exempt if both of following
conditions are satisfied:
a) Premium paid is up to 10%/15% of the capital sum assured and
b) aggregate premium for all the policies taken after 1/4/2023 for the year is upto
₹5,00,000.
However, if aggregate premium exceeds ₹5,00,000, then assessee can claim the
exemption for those policies whose aggregate premium is upto ₹5,00,000.
Example
Following Policies issued on 1/7/24
Show Tax treatment
Policy C.S.A. Premium paid (p.a.)
Policy 1 15,00,000 1,20,000
Policy 2 10,00,000 90,000
Policy 3 25,00,000 2,60,000
Policy 4 15,00,000 1,50,000
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Transfer of Unlisted Shares for Inadequate Consideration [Section 50 CA]
If unlisted shares transfer at a price lower than FMV, then FVC shall be considered as FMV
of shares in hands of transferor in accordance with section 50CA. Also, provisions of gift
are applicable in the hands of transferee.
Example:
• Mr. X sold share of A Ltd. (1,000 shares @ ₹50/share) on 01/10/2024
• Mr. X purchased share @ ₹26/share on 01/01/2023
• Mr. X sold shares to Mr. Y
• FMV of share on 01/10/2024 was ₹120/share.
Show tax implication in the hands of Mr. X and Mr. Y
Inadmissible Deductions [Section 58]
a) Personal Expenses
b) Excessive Payment to Relative
c) Cash Payment > Rs. 10,000 others than through specified mode.
d) Payment on which TDS provisions applicable but TDS not deducted on time or deducted
but not deposited on time.
