by Section 94 of the Income-tax Act, 2025 specifies amounts that are not deductible while computing income chargeable under the head “Income from Other Sources.” It operates notwithstanding the deductions otherwise available under Section 93. The section specifically disallows personal expenses, certain interest payable outside India where applicable tax has not been paid or deducted, and salary payable outside India without the required tax payment or deduction. It also applies specified business-income disallowance provisions to Income from Other Sources and restricts deductions against lottery, crossword puzzle, race, gambling and betting winnings. Thus, it prevents deduction of specified inadmissible expenditure.
1. Personal Expenses
Under Section 94(1)(a), any personal expenses of the assessee are specifically disallowed while computing income under the head Income from Other Sources. Personal expenditure refers to expenses incurred for the assessee’s private or personal purposes rather than for earning taxable income. Even though Section 93 permits certain expenditure incurred wholly and exclusively for earning income, personal expenditure cannot be claimed as a deduction. Therefore, expenses relating to personal consumption, household requirements or other private purposes cannot reduce taxable income from other sources. The purpose of this provision is to ensure that only genuine income-earning expenditure satisfying the statutory conditions is considered for deduction.
2. Interest Payable Outside India
Under Section 94(1)(b), interest chargeable under the Act and payable outside India is not deductible if the required tax has neither been paid nor deducted under Chapter XIX-B. Therefore, where an assessee incurs interest expenditure payable to a person outside India, compliance with the applicable tax-deduction requirements becomes important for claiming the deduction while computing Income from Other Sources. If the prescribed tax is not deducted or paid, the interest expenditure is specifically disallowed under Section 94. This provision supports compliance with tax withholding obligations relating to payments made outside India and prevents deduction where the statutory tax requirements remain unfulfilled.
3. Salary Payable Outside India
Section 94(1)(c) provides that a payment chargeable under the head “Salaries”, when payable outside India, is not deductible unless the required tax has been paid or deducted under Chapter XIX-B. Accordingly, an assessee claiming such salary expenditure against income from other sources must comply with the applicable tax withholding requirements. Where the prescribed tax has not been paid or deducted, the salary payment becomes inadmissible as a deduction for computing taxable income. The provision therefore connects deductibility of specified foreign salary payments with tax-deduction compliance. Its purpose is to ensure proper collection of tax before allowing the expenditure to reduce taxable Income from Other Sources.
4. Application of Certain Business Disallowances
Under Section 94(2), the provisions of Sections 29, 35(b)(i) and 36 also apply while computing Income from Other Sources in the same manner as they apply while computing Profits and Gains of Business or Profession. Consequently, expenditure otherwise connected with earning income from other sources may still become inadmissible where it falls within these specified disallowance provisions. This creates consistency between the computation rules applicable to business income and Income from Other Sources for specified expenses or payments. Therefore, an assessee cannot claim a deduction merely because expenditure satisfies the general conditions of Section 93; the relevant specific disallowance provisions must also be examined.
5. Winnings from Lotteries, Gambling, etc.
Under Section 94(4), no deduction for expenditure or allowance is permitted while computing income from lotteries, crossword puzzles, races including horse races, card games, gambling, betting or other games of any sort. Consequently, expenditure incurred for earning such winnings cannot generally be deducted from the taxable amount. The provision effectively requires the specified winnings to be considered without reducing them by related expenditure or allowances. However, Section 94(5) provides an exception for an assessee who is the owner of horses maintained for running in horse races, in computing income from that activity. Thus, specified casual winnings are subject to strict deduction restrictions.
