Income Tax Law and Practice_ Lecture Notes Compiled by CA Dr.

Gurcharan Sachdeva

Income from Other Sources

It is a residual head of income. The income which is not taxable under any other head will be
taxable under this head only. Moreover, there are gifts or other specified incomes like casual
income, interest on securities, dividend incomes etc. would be taxable under this head. It is
advisable to understand this chapter with the help of following questions
Q.1 Pawan whose age is 55 years, submits the following information pertaining to the PY 2024-
25. From the following details, you are required to compute the net income and tax liability of Mr.
Pawan for the AY 2025-26 on the assumption that Mr. Pawan has deposited Rs. 150000 in the PPF
A/c maintained by the SBI and he does not want to opt for alternative tax regime u/s 115BAC.
He has earned income under the PGBP to the tune of Rs. 3500000. During the financial year 2015-
16, his land was compulsorily acquired by the govt of Maharashtra for the purpose of Metro Rail
project. Initial compensation 3000000 was received by Pawan during 2016-17. On the appeal filed
by him, Bombay High court has increased the compensation by Rs 10 lacs. On 15th September,
2024, he has received the additional compensation along with interest of Rs. 100000 as directed
by the court. For the purpose of getting enhanced compensation, he has spent Rs. 60000 as legal
expense. Moreover, on 31st March, 2025, Mr. Pawan purchases a painting from a close friend at
price of Rs. 100000 although its FMV was Rs. 350000. On the same day, he purchases a used car
at a price of Rs. 75000; although its FMV was not less than Rs. 150000.
Solution:
Income under the head PGBP Rs. 3500000
Income under the capital gains Rs. 1000000
Less: Legal expenses Rs. 60000 Rs. 940000
Income under the head Income from other sources
Interest on enhanced compensation (100000 – 50% deduction) 50000
Purchase of painting for inadequate consideration 250000 Rs.300000
Purchase of car for inadequate consideration but it does not cover under the definition of movable
property
Gross Total Income Rs. 4740000
Less: Deduction u/s 80 C Rs. 150000
Net Taxable income Rs. 4590000
Tax on Rs. 250000 nil
2.5 L-5.0 L @5% 12500
5.0L – 10.0 L @ 20% 100000

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Income Tax Law and Practice_ Lecture Notes Compiled by CA Dr. Gurcharan Sachdeva

>10L @30% 1077000 1189500

Add: Surcharge Nil
Tax & Surcharge 1189500
Add: Health & education cess @4% 47580
Total Tax liability 1237080
Less: Advance Tax nil
TDS nil nil
Net Tax Liability 1237080

Q.2 Rakesh, an individual who is resident in India, submits the following details pertaining to his
income for the PY 2024-25
Name of the payer company Date of declaration of Amount Interest
Dividend paid to paid by
Rakesh Rakesh on
the
borrowed
capital
X Ltd., an Indian Company 15th September, 2024 500000 -
st
Y Ltd., a foreign Company 31 July, 2024 115000 18000
Z Ltd., a foreign Company 1st May, 2024 55000 65000
Moreover, Rakesh received the following gifts during the PY 2024-25
Particulars Amount (Rs.) Date of Gift
Gift from grandmother received under a will 300000 15th October, 2024
Gift from friends at the time of his marriage 290000 31st October, 2024
Gift from elder Brother 200000 31st December, 2024
Gift from a friend Rajesh 225000 31st August, 2024
Gift from a friend Ramesh 100000 20th September, 2024
Gift from friend Ishant 25000 25th September, 2024
Rent from letting of a factory building along with P&M (letting is inseparable): Rs. 65000; Fire
Insurance premium in respect of factory building and P& M: Rs. 1000 and Rs. 1500 respectively.
Repairs 4500, Depreciation of building, P&M is Rs. 35000; collection charges in respect of rent
are Rs. 750.
In addition to this, he won a lottery on 15th December, 2023 and received Rs. 150000 after TDS of
Rs. 65000. Winning from card games Rs. 13500 from which tax was not deducted by the payer.
He has also earned an interest on securities issued by the govt of Australia. Rs. 35000. As a
consultant, you are requested to help Mr. Rakesh to compute the income under the head income
from other sources for the AY 2025-26.

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Income Tax Law and Practice_ Lecture Notes Compiled by CA Dr. Gurcharan Sachdeva

Solution
Computation of income under the head Income from Other Sources
Dividend
From X Ltd. Indian Co 500000
From Y Ltd. Foreign co. 115000
From Z Ltd. Foreign Co. 55000 6700000
Less: Deduction on account of interest on borrowed capital but to the
Extent 20% (Nil + 18000+65000) (83000) 587000
Gifts
Grandmother under a will (relative) exempt
From friend on marriage exempt
From elder brother (relative) exempt nil
Gifts from non-relative
From friend Rajesh 225000
From friend Ramesh 100000
From friend Ishant 25000 350000
Composite rental income
Rental Income 65000
Less: fire insurance
Bdg 1000
P&M 1500 (2500)
Repairs (4500)
Depreciation (35000)
Collection charges (750) 22250
Casual Income
Winning from Lottery (150000+65000) 215000
Winning from card games 13500 228500

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Income Tax Law and Practice_ Lecture Notes Compiled by CA Dr. Gurcharan Sachdeva

Interest on securities 35000

GTI 1222750

Other incomes Casual Income

994250 228500
Slab new Tax regime @30%
59138 + 68550 127688
Add: Surcharge nil
Tax and Surcharge 127688
Add: Health and Education cess @4% 5108 132800
(round off)
Less: TDS 65000
Net Tax Liability 67800
Old tax regime
Tax on 994250 228500
Slab @30%
111350 + 68550 = 179900
Add: Surcharge nil
Tax and Surcharge 179900
Add: Health and Education cess @4% 7196 187096
Less: TDS 65000
Net Tax liability 122100
(round off)

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Income Tax Law and Practice_ Lecture Notes Compiled by CA Dr. Gurcharan Sachdeva

Q.3 From the following particulars pertaining to the gifts received by Swami, you are required to
compute income chargeable to tax under the head income from other sources during the PY 2024-
25.
a) On the occasion of his marriage, Swami gets Rs. 275000 as gift in cash on 13th April, 2024
out of which Rs. 200000 is received from the friends of Swami and his wife and rest of
the amount is received from their close relatives.
b) On 25th June, 2024, he received the gift of Rs. 13000 from Banarasi Dass, who is the
younger brother of his grandfather.
c) On 12th August, 2024, he received the gift of Rs. 25000 from Sunder Dass, who is cousin
of his father
d) On 30th September, 2024, he received the gift of Rs. 750000 from his grandmother
e) A laptop received from his employer which was purchased by the employer for Rs. 75000
on 15th May, 2024 and given as gift to swami on 15th October, 2024
f) On 15th November, 2024, swami purchased a HP from his close friend Sandeep for Rs.
75000 although, its stamp duty value was Rs. 1200000 on that day.
g) On 25th November, 2024 Swami received a gift of plot of land from his grandfather, stamp
duty value of that plot of land was Rs. 1250000
h) On 15th December, 2024 swami received the gift of a flat from the elder brother of his
father-in-law, stamp duty value of that flat was Rs. 2000000
i) On 31st December, 2024, he received the gift of Rs. 200000 (out of which cash gift was
Rs. 30000 and gift of work of art whose market value is Rs. 170000) from a notified
charitable institution.
j) On 1st January, 2025 he received the HP under a will from a person known to him. The
stamp duty value of HP was Rs. 2500000
k) On 13th January, 2025 (on the occasion of Lohri celebration), he received the smart watch
as a gift from his close friend Sachin. Its FMV is Rs. 50000
l) On 15th January, 2025, he purchased a archeological collection from an exhibition in Dubai
for Rs. 1700000, although its FMV was 1800000
m) On 31st January, 2025, he purchases a property for Rs. 1700000 and its stamp duty value
was Rs. 1800000.
n) On 1st February, 2025 he received the gold jewellery worth Rs. 12500 from his close friend
on the occasion of his birth anniversary.
o) On 20th February, 2025 he received the plot of 100 square yard situated in Mohali as a gift
from partnership firm whose partners are his father and his father-in-law. The stamp duty
value of the plot of land was Rs. 2000000.
p) On 29th February, 2025 he purchased the 500 shares of GAIL Ltd. from his close friend
Sachin at a price of Rs. 100 per share. Although, lowest quoted price of the share was
Rs. 250 at BSE and Rs. 275 per share at NSE.
q) On 5th March, 2025 he received the gold jewellery from the cousin of his mother-in-law,
whose FMV was Rs. 18000.
r) On 25th March 2025, he received the work of art as a gift from the company in which more
than 75% shares are held by his wife. The FMV of the work of art is Rs. 25000.

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Income Tax Law and Practice_ Lecture Notes Compiled by CA Dr. Gurcharan Sachdeva

s) On 31st March, 2025 he received the plot of land as a gift from a cousin of his wife. The
stamp duty value of the property was Rs. 45000.
t) On 31st March, 2025 he received the shop located in Rajouri Garden, Delhi as a gift from
a friend whose stamp duty value is Rs. 50000.

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Income Tax Law and Practice_ Lecture Notes Compiled by CA Dr. Gurcharan Sachdeva

Q.4 Ram, Shyam, Ghanshyam and Krishan had taken a life insurance policy on 30th April, 2024.
They intend to understand the amount taxable u/s 56(2)(xiii). They are not having any other policy
and do not want to purchase any other insurance policy in the future period. The following
information is provided with regard to their respective policies.
Ram Shyam Ghanshyam Krishan
Term of the policy (in years) 10 10 10 10
Sum Assured (Rs. In Lakhs) 60 40 70 70
Annual Insurance Premium (out of which 4.9 4.5 7.1 6.9
deduction of Rs. 1.50 lakh has been
claimed annually u/s 80C) (Rs. In Lakhs)
Amount payable at the time of maturity 69 46 80.5 80.5
in the FY 2033-34 (sum assured +15%
Bonus) (Rs. In lakh)
You are required to compute the income taxable u/s 56(2)(xiii) under the head Income from other
Sources for the PY 2034-35, relevant for the AY 2035-36.
Solution: In this case, since the policy is issued on or after 1st April, 23 and Ram is satisfying
both the conditions namely
1. Annual premium should not exceed 10% of the insured amount and
2. Annual premium should not exceed Rs. 500000 in any of the year (during the term of
policy) of one or two or more policies taken together
Therefore, the amount received at the maturity shall be exempt from tax u/s 10(10D) and nothing
would be taxable u/s 56(2)(xiii) during the PY 2033-34

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Income Tax Law and Practice_ Lecture Notes Compiled by CA Dr. Gurcharan Sachdeva

In the cases of Shyam, Ghanshyam and Krishan; since they do not satisfy the abovementioned
conditions therefore, the amount received by them on maturity is not exempt from tax and would
chargeable to tax u/s 56(2)(xiii) which is computed as under
Particulars Shyam Ghanshyam Krishan
Policy amount on maturity (Rs. In lakh): I 46 80.5 80.5
Annual premium after deduction u/s 80C :II 3.0 5.6 5.40
Total premium paid during the term of policy 30 56 54
after deduction u/s 80C : III [II X10] (Rs. In
lakh)
IV : Taxable income u/s 56(2)(xiii): (I- III) 16 24.50 26.50

Q.5 Atul provides the following information relating to his life insurance policies
Particulars Policy I Policy II Policy III
Date of Commencement of insurance 1st April, 1st April, 1st April,
2022 2024 2028
Term of the policy (in years) 10 10 10
Sum assured (Rs. In Lakh) 65 40 45
Annual insurance premium (no deduction was 6 3.8 4.4
claimed u/s 80C) (Rs. In Lakh)
Amount payable at the time of maturity in the 71.5 44 49.5
FY 2033-34 (sum assured +10% Bonus) (Rs. In
lakh)
1st April, 24 1st April, 28
to 31st to 31st
March 2034 March 38
Common period shall be
1st April 28 to 31st March
34
Annual premium during
this period shall be
(3.8+4.4= 8.20) which
exceeds Rs. 5 lakh
You are required to compute the income taxable u/s 56(2)(xiii) under the head Income from other
Sources for the PY 2034-35, relevant for the AY 2035-36.
Solution:
Since the policy I is issued prior to 1st April 23 and is satisfying the condition that the annual
premium dues not exceed 10% of the sum assured and therefore the on policy I, Atul is entitled to
get exemption u/s 10(10D).
Since Atul does not satisfy the 2nd condition namely the max ceiling of Rs. 500000 as the amount
of annual premium exceeds Rs. 500000 during the 1st April 28 to 31st March 2034 and therefore
the taxability shall arise as under

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Income Tax Law and Practice_ Lecture Notes Compiled by CA Dr. Gurcharan Sachdeva

Policy II Policy III

Amount to be received on maturity (Rs. in 44 49.5
lakh)
Annual premium 3.80 4.40
Total premium paid during the term of policy 38 44
Income taxable u/s 56(2)(xiii) 6 5.5
Taxable during the PY ?

Q.6 Rakesh holds the undermentioned securities on 1st April, 2024:

Particulars Amount (Rs.)
7% Punjab Govt loan (Date of payment of interest is 1st January) 1500000
5% non-listed debentures of XYZ Ltd. (dates of payment of interest: (June 60000
30 and December 30 every year)
9% Debentures of MNO Ltd. (dates of payment of interest: (June 10 and 50000
December 10 every year)
On 1st December, 2024 Rakesh sells Rs. 50000, 9% debentures of MNO Ltd. you are required to
compute the taxable income for the AY 2025-26 on the assumption that he has earned a income
from business to the tune of Rs. 575000 and interest on saving bank is Rs. 5000 from Axis bank
and Rs. 10000 from post office saving account. Moreover, he has received a gift of Rs. 125000 in
foreign currency from a close friend on 31st December, 2024 on the occasion of his wedding
anniversary.
Q.7 Parmod (42 years) is resident in India for the PY 2024-25. You are requested to help him to
compute his net income and tax liability for the AY 2025-26 on the basis of following details:
Winning from races Rs. 12000 and expenditure incurred for the same amounting to Rs. 2500.
STCG where STT is applicable: Rs. 370000, interest on fixed deposits Rs. 235000. He has
contributed Rs. 154000 towards the public Provident Fund.
Q.8 Mr. Ram (39 years) and Mr. Anil (63 years) both are resident in India during the PY 2024-25.
As a tax practitioner, you are required to compute the tax liability for both of them for the AY
2025-26 under regular tax regime.
Particulars Ram Shyam
Amount (Rs.)
Long-term capital gain taxable @20% u/s 112 825000 35000
STCG taxable @15% u/s 111A 460000 200000
Winning from lottery/crossword puzzles/KBC u/s 3000 75000
115BB
Other income taxable at normal rates 15000 5000
Net income 1303000 315000

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Income Tax Law and Practice_ Lecture Notes Compiled by CA Dr. Gurcharan Sachdeva

If insurance policy is issued before 1st April, 2023:

1. Annual premium should not exceed 10% of the insured amount
Policy insured amount: Rs. 60000000; annual premium should not exceed 600000
If insurance policy is issued on or after 1st April, 2023:
1. Annual premium should not exceed 10% of the insured amount and
2. Annual premium should not exceed Rs. 500000 in any of the year (during the term of
policy) of one or two or more policies taken together
If all the conditions are satisfied then the amount received on maturity shall be exempt from tax
u/s 10(10D)
I: 21st April, 23: policy: 4000000; annual premium 300000
II 15th April, 2026 3000000; annual premium 250000

Ist Category: gift in Money (Cash +Draft+ gPay+paytm+NEFT etc.): All Transactions: should not
exceed Rs. 50000 during the PY
2 categories: Immovable property: Single Transaction (1)
1. For without consideration: Stamp duty value should not exceed Rs. 50000
2. For inadequate consideration:
If Stamp duty value <=110% of sale consideration and
Stamp duty value – sale consideration <= 50000
Example :
1. Stamp duty value Rs. 500000
Sale consideration Rs. 400000
110% of sale consideration: Rs. 440000
In this case Stamp duty value (500000)> 440000 (Sale consideration)
Stamp duty value – sale consideration = 500000- 400000 = 100000> 50000
In such case Rs. 100000 shall be chargeable to tax under the head IOS
2. Example
Stamp duty value Rs. 500000
Sale consideration Rs. 450000
110% of sale consideration = 495000
Stamp duty value > 110% of sale consideration (500000>495000)
Stamp duty value – sale consideration = 500000-495000 > 50000
Then nothing would be chargeable to tax
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Income Tax Law and Practice_ Lecture Notes Compiled by CA Dr. Gurcharan Sachdeva

Agreement entered into for a property on 1st April, 24

Agreed price of the property was Rs. 1500000 and stamp duty value Rs. 1500000
Final payment 31st July: stamp duty value: 1800000

2 categories: Movable property: All Transactions: should not exceed Rs. 50000 during the PY
1. For without consideration
2. For inadequate consideration

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