The income chargeable to tax under the head ‘Income from Other Sources’ is computed after making the following deductions:
1. Deduction in respect of Employee’s Contribution towards Staff Welfare Schemes [Section 57(ia)] –
Deduction in respect of any sum received by a taxpayer as contribution from his employees towards any welfare fund of such employees is allowable only if such sum is credited by the taxpayer to the employee’s account in the relevant fund before the due date. For this purpose “due date” is the date by which the assessee is required as an employer to credit such contribution to the employees’ account in the relevant fund under the provisions of any law or terms of contract of service or otherwise .
2. Deductions permissible from Letting out of Machinery, Plant or Furniture and Buildings [Section 57(ii) and (iii)]
The following deductions are allowable:
- Current repairs, to the premises held otherwise than as tenant.
- Insurance premium against risk of damage or destruction of the premises.
- Repairs and insurance of machinery, plant or furniture.
- 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.
- 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.
3. Standard Deduction in the case of Family Pension [Section 57(iia)] –
In the case of income in the nature of family pension, the amount deductible is
- Rs. 15,000 or
- 33 1/3 % of such income,
whichever is less.
For this purpose, “family pension” means a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his death.
4. Any other Expenses for Earning Income [Section 57(iii)] –
Any other expenditure is deductible under section 57(iii) if the following four basic conditions are satisfied:
- the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning the income;
- the expenditure must not be in the nature of capital expenditure;
- it must not be in the nature of personal expenses of the assessee;
- it must be laid out or expended in the relevant previous year and not in any prior or subsequent year.
5. 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:
- Collection charges:
- Interest on loan:
- 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.
6. 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:
- Collection charges [Section 57(i)]:
- Interest on loan [Section 57(iii)]:
- 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.
Amount Expressly Disallowed in computing the ‘Income from Other Sources’ (Section 58)
The following expenses are not deductible by virtue of section 58 in computing the income chargeable under the head ‘Income from Other Sources’ :
PERSONAL EXPENSES [Section 58(1)(a)(i)] – Any personal expenses of the assessee is not deductible.
INTEREST [Section 58(1)(a)(ii)] – Any interest (which is chargeable under the Act in the hands of recipient) which is payable outside India on which tax has not been paid or deducted at source, is not deductible.
SALARY [Section 58(1)(a)(iii)] – Any payment (which is chargeable under the head “Salaries” in the hands of recipient and payable outside India), is not deductible if tax has not been paid or deducted therefrom .
WEALTH TAX [Section 58(1)] – Any sum paid on account of wealth-tax is not deductible.
TDS DEFAULT [Section 58(1A)] – Disallowance provisions pertaining to TDS defaults covered by section 40(a)(ia) are applicable .
AMOUNT SPECIFIED BY SECTION 40A [Section 58(2)] – Any expenditure referred to in section 40A like excessive or unreasonable payments to certain specified persons [Section 40A(2)] and payments exceeding Rs. 20,000 otherwise than by way of account payee cheque [Section 40A(3)];
EXPENDITURE IN RESPECT OF ROYALTY AND TECHNICAL FEES RECEIVED BY A FOREIGN COMPANY [Section 58(3)] – In the case of foreign companies, expenditure in respect of royalties and technical service fees as specified by section 44D is not deductible.
EXPENDITURE IN RESPECT OF WINNINGS FROM LOTTERY [Section 58(4)] – No deduction shall be allowed under any provision of the Act in computing the income by way of any winnings from lotteries, crossword puzzles, races.
However, expenditure incurred by the assessee for the activity of owning and maintaining race horses shall be allowed as a deduction while computing the income from this activity.