Deductions from 'Income from Other Sources' [Section 57]

The income chargeable to tax under this head 'Income from Other Sources' is computed after making the following deductions:

1. In the case of dividend income (and interest on securities: any reasonable sum paid by way of remuneration or commission for the purpose of realising dividend or interest.

2. In the case of income in the nature of family pension:

• Rs. 15,000 or

• 33 1/3  % (33.33%) of such income,

whichever is lower.

3. In the case of income from machinery, plant or furniture let on hire:

• repairs to building [section 30(a)(ii)];

• current repairs to machinery, plant or furniture and insurance premium [section 31];

• depreciation on building, machinery, plant or furniture [section 32]; and

• unabsorbed depreciation [section 32(2)].

4. Any other expenditure (not being a capital expenditure) expended wholly and exclusively for the purpose of earning of such income.

5.In the case of interest on compensation or enhanced compensation: 50 per cent of such interest (applicable from the assessment year 2010-11).

1. Deductions for expenses from dividend income [Section 57(i) and 57(iii)]:

The following expenses can be claimed as deductions from gross dividend income other than the dividends referred to in section 115-O:

1. Collection charges: any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realising the dividend.

2. Interest on loan: Interest on money borrowed for purchasing the shares can be claimed as a deduction. The interest can be claimed even if no income is earned by way of dividend on such shares. It has been held by the Supreme Court that if the expenditure has been laid out for the purpose of earning the dividend income then whether income is actually earned or not is immaterial and deduction on account of interest can be claimed.
   Since dividends referred to in section 115-O (i.e. dividends covered under section 2(22)(a), (b), (c) and (d) are exempt in the hands of the shareholders, no deduction of any expense referred to in section 57 shall be allowed.

3. Any other expenditure: Any other expenditure, not being a expenditure of a capital nature, expended wholly and exclusively for the purpose of making or earning such income, can be claimed as a deduction.

2. Deductions for expenses from Interest on Securities [Section 57(i) and (iii)]:

As discussed in the case of dividends, the following deductions will also be allowed from the gross interest on securities:

(a) Collection charges [Section 57(i)]: Any reasonable sum paid by way of commission or remuneration to a banker, or any other person for the purpose of realising the interest.

(b) Interest on loan [Section 57(iii)]: Interest on money borrowed for investment in securities can be claimed as a deduction.

(c) Any other expenditure [Section 57(iii)]: Any other expenditure, not being a expenditure of a capital nature, expended wholly and exclusively for the purpose of making or earning such income can be claimed as a deduction.

3. Deductions permissible from letting out of machinery, plant or furniture and buildings [Section 57(ii) and (iii)]:

The following deductions are allowable:

1. Current repairs, to the premises held otherwise than as tenant.

2. Insurance premium against risk of damage or destruction of the premises.

3. Repairs and insurance of machinery, plant or furniture.

4. Depreciation based upon block of assets, in the same manner as allowed under section 32 in the case of Income from Business and Profession subject to the provisions of section 38 i.e. if it is partly let and partly used for own purpose, deduction of expenses (including depreciation) shall be allowed to the extent it is let out.

5. Any other expenditure: Any other expenditure, not being a expenditure of a capital nature, laid out or expended wholly and exclusively for the purpose of making or earning such income can be claimed as a deduction.