Deductions Allowed in computing the 'Income from Other Sources'(Section 57)

1. Deduction in respect of Employee’s Contribution towards Staff Welfare Schemes [Section 57(ia)]

2. Deductions permissible from Letting out of Machinery, Plant or Furniture and Buildings [Section 57(ii) and (iii)]

3. Standard Deduction in the case of Family Pension [Section 57(iia)]

4. Any other Expenses for Earning Income [Section 57(iii)]

5. Deductions for Expenses from Dividend Income [Section 57(i) and 57(iii)]

6. Deductions for Expenses from Interest on Securities [Section 57(i) and (iii)]

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:

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.

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:

1. the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning the income;

2. the expenditure must not be in the nature of capital expenditure;

3. it must not be in the nature of personal expenses of the assessee;

4. 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:

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.

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.

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:

1. 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.

2. Interest on loan [Section 57(iii)]:

Interest on money borrowed for investment in securities can be claimed as a deduction.

3. 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.