Tag: Income Tax Osmania University B.com Notes

Casual income

Casual income means income in the nature of winning from lotteries, crossword puzzles, races including horse races, card games and other games of any sort, gambling, betting etc. Such winnings are chargeable to tax at a flat rate of 30% under section 115BB.

Conditions:

1. No expenditure or allowance can be allowed from such income.
2. Deduction under Chapter VI-A is not allowable from such income.
3. Adjustment of unexhausted basic exemption limit is also not permitted against such income.

In order to prevent the practice of receiving sum of money or the property without consideration or for inadequate consideration, section 56(2)(x) brings to tax any sum of money or the value of any property received by any person without consideration or the value of any property received for inadequate consideration.

Sum of Money: If any sum of money is received without consideration, and the aggregate value of which exceeds ₹ 50,000, the whole of the aggregate value of such sum is chargeable to tax.

Immovable property:

I. If an immovable property is received

1. Without consideration, the stamp duty value of such property would be taxed as the income of the recipient if it exceeds ₹ 50,000.
2. For a consideration, which is less than the stamp duty value of the property by an amount exceeding ₹ 50,000, the difference between the stamp duty value and the consideration shall be chargeable to tax in the hands of the assessee as “Income from other sources”.
3. Value of property to be considered where the date of agreement is different from date of registration: Taking into consideration the possible time gap between the date of agreement and the date of registration, the stamp duty value may be taken as on the date of agreement instead of the date of registration, if the date of the agreement fixing the amount of consideration for the transfer of the immovable property and the date of registration are not the same, provided whole or part of the consideration has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system (ECS) through a bank account on or before the date of agreement.
4. If the stamp duty value of immovable property is disputed by the assessee, the Assessing Officer may refer the valuation of such property to a Valuation Officer. In such a case, the provisions of section 50C and section 155(15) shall, as far as may be, apply for determining the value of such property.

As per section 50C, if such value is less than the stamp duty value, the same would be taken for determining the value of such property, for computation of income under this head in the hands of the buyer.

Movable Property:

If the movable property is received

1. Without consideration, the aggregate fair market value of such property on the date of receipt would be taxed as the income of the recipient, if it exceeds ₹ 50,000.
2. For a consideration which is less than the fair market value of the property by an amount exceeding ₹ 50,000, and the difference between the aggregate fair market value and such consideration exceeds ₹ 50,000, such difference would be taxed as the income of the recipient.

Applicability of section 56(2)(x):

The provisions of section 56(2)(x) would apply only to property which is the nature of a capital asset of the recipient and not stock-in-trade, raw material or consumable stores of any business of the recipient.

Non-applicability of section 56(2)(x):

However, any sum of money or value of property received in the following circumstances would be outside the ambit of section 56(2)(x):

1. From any relative; or
2. On the occasion of marriage; or
3. Under a will or by way of inheritance; or
4. In contemplation of deathof the payer or donor, as the case may be; or
5. From any local authorityas defined in the Explanation to section 10(20); or
6. From any fund or foundation or university or other educational institution or hospital, etc. referred to in section 10(23C); or
7. From any trust or institution registered under section 12AA; or
8. By any fund or trust or institution or any university or other educational institution or any hospital, etc. referred to in Section 10(23C)(iv)/(v)/(vi)/(via).
9. By way of the transaction not regarded as a transfer under section 47.
10. From an individual by a trust created or established solely for the benefit of a relative of the individual.

Relative includes:

1. In case of an individual:
2. spouse of the individual;
3. brother or sister of the individual;
4. brother or sister of the spouse of the individual;
5. brother or sister of either of the parents of the individual;
6. any lineal ascendant or descendant of the individual;
7. any lineal ascendant or descendant of the spouse of the individual;
8. Spouse of any of the persons referred to above.

Family Pension

Pension received by a family member is taxed under income from other sources in family member’s income tax return. If this pension is commuted or is a lump sum payment, it is not taxable. Uncommuted pension received by a family member is exempt to a certain extent. Rs 15,000 or 1/3rd of the uncommuted pension received whichever is less is exempt from tax.

Pension that is received from UNO

Pensions that are received from UNO by its employees or their family is exempt from tax. Pension received by family members of armed forces is also exempt.

• If a family member receives a pension of Rs 2,00,000, the exemption available is least of – Rs 15,000 or Rs 66,667 (1/3rd of Rs 2,00,000). Thus, the taxable family pension will be Rs 2,00,000 – Rs 15,000 = Rs 1,85,000

If an assessee lets on Hire machinery, plant or furniture and also building & letting of building is inseparable from letting of machinery, plant, furniture, then income from such letting is taxable under Income from Other Sources if not taxed as Business Income. Broadly classifying following nature of rent received on Hire of Assets specified above is taxed under Income from Other Sources:

• If there is letting of Building as well as the assets & both form Part & Parcel of the same transaction since the two lettings are INSEPARABLE, e.g., Theatre Building and its Furniture is taxable under the Head Income from Other Sources, if not charged as Business Income.
• If there is letting of Building as well amenities but without any letting of Assets, then this section is not applicable & the whole of such Income earned will be taxed under Income from House Property.

 Permissible Deductions from Income from letting out of Machinery, Plant etc. 

• Current repairs to the premises held otherwise than as a tenant;
• Insurance Premium towards physical safety of the premises;
• Repairs & Insurance of Machinery, Furniture etc.
• DEPRECIATION based on Block of Assets in the same manner as calculated u/s 32 in Profits & gains from Business & Profession.
• Any other expenditure not of Capital nature and should be incurred wholly & exclusively for earning such Income.

While learning about TDS on rent, it is also imperative to know more about what the term ‘rent’ actually signifies. Rent equates to any payment, which is made under any sub-lease/ lease/ tenancy/ arrangement/ agreement for using the following:

• Building (inclusive of factory buildings)
• Land
• Land appurtenant to any building (inclusive of factory buildings)
• A plant like an industrial or manufacturing facility
• Equipment like tools, computer systems, networks, other infrastructure required for running a business
• Machinery
• Fittings
• Furniture

Tax (TDS) Deduction Rates

Tax (TDS) has to be deducted at the time of crediting/paying the income by way of rent to the payee account through a cheque/draft/cash or other payment methods. The rates of TDS can be summed up as follows:

• Rent for plant/ equipment/ machinery: 2% TDS on the rent amount paid
• Rent for land/ building/ furniture/ fittings: 10% TDS on the rent amount paid
• Individual/ HUF not liable to tax audit: 5% TDS on the rent paid in cases where more than `50,000 is paid per month as rent.

Subsequent to the abolishment of Dividend Distribution Tax (DDT) from the statute, Finance Act, 2020 has made the dividend income taxable in the hands of the recipients (shareholders). Section 57 of the Income Tax Act, 1961 (“Act”) has also been amended to provide for deduction of interest expended for earning such dividend income. Further, a new section 80M is inserted in the Act for allowing deduction in respect of certain inter-corporate dividends.

Section 57 of the Act provides for certain deductions that are allowed against income chargeable under the head “Income from other sources”. Clauses (i), (ia), (ii), (iia), (ii) and (iv) of section 57 specifically mention the deductions available while computing the income chargeable under the head ‘Income from other sources’.

Out of these, deduction under clauses (i) and (iii) to section 57 are relevant for claiming and allowing a deduction from dividend income chargeable under the head ‘Income from other sources’.

Section 57(i) allows a deduction from any dividend income or interest on securities for any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realising such dividend or interest on behalf of the assessee. This deduction is specific to dividend income or interest on securities only.

Section 57(iii) is general in nature and allows deduction of any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning any income which is chargeable under the head “income from other sources“.

For availing the deduction under Section 57(iii) of the Act, the assessee has to establish that the expenditure has been exclusively laid out or expended wholly and exclusively for the purpose of making or earning such income taxable under the head ‘income from other sources’.

Section 57 provides for certain deductions to be made in computing the income chargeable under the head ‘Income from other sources’ and one of such deductions is that set out in clause (iii), which reads as follows:

(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income;

The expenditure to be deductible under section 57(iii) must be laid out or expended wholly and exclusively for the purpose of making earning such income. It is the purpose of the expenditure that is relevant in determining the applicability of section 57(iii) and that purpose must be making or earning income.

When the borrowed funds have been utilized for the purpose of making the investment in shares on which dividend income is earned which is taxable under the head ‘income from other sources’, then the deduction for the interest on the borrowed funds is allowed under section 57(iii).

Deductions for expenses from dividend income – Section 57(i) and section 57(iii)

Therefore, from the dividend income, the following expenditures are allowed as a deduction under section 57:

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. [Section 57(i)]
2. Interest on money borrowed: Interest on money borrowed for purchasing the shares can be claimed as a deduction. [Section 57(iii)]

Note: There is no specific clause in section 57 which allows for a deduction for interest expense on loans taken for investing in shares for earning dividend income. Hence, if interest is expended wholly and exclusively for earning the dividend income it will be allowed as a deduction under clause (iii) of section 57.

3. Any other expenditure: Apart from the above, if the assessee incurs any other expenditure, not being in the nature of capital expenditure, wholly and exclusively for the purpose of making or earning the income, can be claimed as a deduction. [Section 57(iii)]

Limit on deduction for interest expense from dividend income

Finance Act, 2020 has amended section 57 and a proviso is inserted w.e.f. 01-04-2021 to provide that no deduction shall be allowed from the dividend income, or income in respect of units of a Mutual Fund specified under clause (23D) of section 10 or income in respect of units from a specified company defined in the Explanation to clause (35) of section 10, other than deduction on account of interest expense, and in any previous year such deduction shall not exceed 20 per cent of the dividend income, or income in respect of such units, included in the total income for that year, without deduction under section 57.

In other words, the proviso to section 57 restricts the deduction for interest expense against gross dividend income (before allowing deduction u/s 57) and the maximum amount of interest expenses that can be allowed as a deduction in a previous year is limited to 20% of the dividend income included in the total income.

One should note that the proviso is placed below section 57 which stipulates that no deduction other than interest expense shall be allowed from the dividend income and that too maximum at 20% of dividend income included in the total income. However, section 57(i) allows a deduction for collection charges from the realization of dividend income.

However, from a plain reading of the proviso, it follows that only interest expenses, subject to the stated limit of 20%, will only be allowed as a deduction from the dividend income and no other deduction will be allowed therefrom. Does it mean that the collection charges from the realization of dividend income as stipulated in clause (i) shall also be disallowed from dividend income?

If this view is taken then clause (i) will become otiose and redundant. It should be further noted that clause (i) is also amended by the Finance Act, 2020 to amend the word ‘dividend’. Prior to the amendment, clause (i) refers to “dividends, other than dividends referred to in section 115-O”. Since section 115-O is withdrawn from 01.04.2021 (AY 2021-22) the reference was amended to refer to ‘dividends’ only. The expression “dividends, other than dividends referred to in section 115-O” is substituted with the word ‘dividends’.

Therefore, the legislature did not omit the dividend from the clause (i) but in its wisdom retained the same in clause (i).

Section 45(2) of Income Tax Act deals with the cases where a capital asset is converted into stock in trade. Whenever a capital asset is converted into stock in trade by an assessee it is deemed as transfer of capital asset and attracts capital gain provisions, in spite of the fact that the ownership of such capital asset doesn’t change by such conversion.

Relevant provisions:

Section 2(47)(iv) while defining the term “Transfer” in relation to a capital asset provides for that it includes “in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment”

Section 45(2): “Notwithstanding anything contained in sub-section (1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.”

Section 2(22B) defines the Fair Market value in relation to a capital asset as follows:

(i) The price that the capital asset would ordinarily fetch on sale in the open market on the relevant date; and

(ii) Where the price referred to in sub-clause (i) is not ascertainable, such price as may be determined in accordance with the rules made under this Act

From the above relevant provisions, the following points can be summed up:

Capital Gain shall be computed in the year when such converted asset is sold: Although conversion of a capital asset into stock in trade is treated as transfer in relation to a capital asset but section 45(2) provides that capital gain/loss shall be calculated on such converted asset in the year in which such asset is actually sold.

Cost indexation shall be done till the year of conversion: Although the transfer of capital asset in case of its conversion into stock in trade, is deemed to have taken place in the year of conversion but the capital gain/loss is computed in the year of sale of such asset.

Hence the indexation of cost of acquisition and improvement will be done (in case of long term capital asset) by considering the C.I.I of the year of conversion. In the above example the C.I.I of year 2009-10 will be considered (since it’s the year of conversion) while calculating capital gain/loss in the year 2010-11.

F.M.V to be the sale consideration in case of conversion while calculating capital gains: As per above discussion transfer of capital asset into stock in trade is treated as transfer in relation to capital asset and capital gain/loss is computed in the year of sale of such asset. The question arises in mind that in such case what shall be the sale consideration which is to be used while calculating capital gain/loss. As per section 45(2) the sale consideration will be equivalent to the Fair Market Value of such asset as existing on the date of conversion. F.M.V has been defined u/s 2(22B) as provided above.

Business Income also to be calculated in the year of sale: After the conversion of capital asset into stock in trade of business of assessee, where the Fair Market Value on the date of conversion is  considered as full sale consideration of such capital asset for the purpose of capital gain/loss computation, such fair market value is considered as cost of such asset as converted into stock in trade in the books of accounts and at the time of sale of such stock in trade the sale price (as realized from sale of such stock in trade asset)  will be deducted from the fair market value of such asset as existing on the date of conversion(Since it’s the cost price of stock in trade) and the profit arising therefrom, if any shall be treated as Income U/H business and profession.

Cost of Acquisition (COA) means any capital expense at the time of acquiring capital asset under transfer, i.e., to include the purchase price, expenses incurred up to acquiring date in the form of registration, storage etc. expenses incurred on completing transfer.

Cost of Acquisition with Reference to Certain Modes of Acquisition (Section – 49)

1. Where the capital asset became the property of the assessee:
2. on any distribution of assets on the total or partial partition of a Hindu undivided family;
3. under a gift or will;
4. by succession, inheritance or devolution;
5. on any distribution of assets on the dissolution of a firm, body of individuals, or other association of persons, where such dissolution had taken place at any time before 1.04.1987;
6. on any distribution of assets on the liquidation of a company;
7. under a transfer to a revocable or an irrevocable trust;
8. by transfer from its holding company or subsidiary company;
9. by transfer in a scheme of amalgamation;
10. by an individual member of a Hindu Undivided Family giving his separate property to the assessee HUF anytime after 31.12.1 969.

cost of acquisition of the asset shall be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the asset incurred or borne by the previous owner or the assessee, as the case may be, till the date of acquisition of the asset by the assessee.

If the previous owner had also acquired the capital asset by any of the modes above, then the cost to that previous owner, who had acquired it by mode of acquisition other than the above, should be taken as cost of acquisition.

2. Where shares in an amalgamated Indian company became the property of the assessee in a scheme of amalgamation the cost of acquisition of the shares of the amalgamated company shall be the cost of acquisition of the shares in the amalgamating company.
3. Where a share or debenture in a company, became the property of the assessee on conversion of bonds or debentures the cost of acquisition of the asset shall be the part of the cost of debenture, debenture stock or deposit certificates in relation to which such asset is acquired by the assessee.
4. Where shares, debentures or warrants are acquired by the assessee under Employee Stock Option Plan or Scheme and they are taken as perquisites u/s 1 7(2) the Cost of Acquisition would be the valuation done u/s 17(2).

The cost of acquisition of the original shares held by the share holder in the demerged company will be reduced by the above amount.

6. Where Capital Gains is not levied on a transfer of capital asset between a Subsidiary Company and a Holding Company or vice-versa but the conditions laid down are violated subsequently and Capital Gains is to be levied, the cost of acquisition to the transferee company would be the cost for which such asset was acquired by it.
7. Where the capital asset is goodwill of a business or a Trade Mark or Brand Name associated with a business, right to manufacture, produce or process any article or thing, right to carry on any business, tenancy rights, stage carriage permits or loom hours, the cost of acquisition is the purchase price paid by the assessee and in case no such purchase price is paid it is nil.
8. Where the cost for which the previous owner acquired the property cannot be ascertained, the cost of acquisition to the previous owner means the Fair Market Value on the date on which the capital asset became the property of the previous owner.
9. Where the capital asset became the property of the assessee on the distribution of the capital assets of a company on its liquidation cost of acquisition of such asset is the Fair Market Value of the asset on the date of distribution.
10. Where share or a stock of a company became the property of the assessee on:

• the consolidation and division of all or any of the share capital of the company into shares of larger amount than its existing shares;
• the conversion of any shares of the company into stock;
• the re-conversion of any stock of the company into shares;
• the sub-division of any of the shares of the company into shares of smaller amount; or
• the conversion of one kind of shares of the company into another kind. Cost of acquisition of the share or stock is as calculated from the cost of acquisition of the shares or stock from which it is derived.

11. The cost of acquisition of rights shares is the amount which is paid by the subscriber to get them. In case a subscriber purchases the right shares on renunciation by an existing share holder, the cost of acquisition would include the amount paid by him to the person who has renounced the rights in his favor and also the amount which he pays to the company for subscribing to the shares. The person who has renounced the rights is liable for capital gains on the rights renounced by him and the cost of acquisition of such rights renounced is nil.

12. The cost of acquisition of bonus shares is nil.
13. Where equity share(s) are allotted to a share holder of a recognised stock exchange in India under a scheme of demutualisation or corporotisation approved by SEBI, the cost of acquisition of the original membership of the exchange is the cost of acquisition of the equity share(s). The cost of acquisition of trading or clearing rights acquired under such scheme of demutualisation or corporatisation is nil.
14. Where any other capital asset has become the property of the assessee before 1st day of April, 1981, the cost of acquisition of the asset to the assessee or the previous owner (depending upon the mode of acquisition) or the fair market value of the asset on 1.4.1981, at the option of the assessee would be its cost of acquisition.
15. Where the capital gain arises from the transfer of specified security or sweat equity shares, the cost of acquisition of such security or shares shall be the fair market value which has been taken into account while computing the value of the respective fringe benefit.
16. Where the capital asset, being a share or debenture of a company, became the property of the assessee in consideration of transfer of bonds or debentures or Global Depository Receipts purchased in foreign currency, the cost of acquisition shall be deemed to be that part of the cost of debentures or bond or deposit certificate in relation to which such asset is acquired by the assessee.

Cost of Acquisition of Depreciable Assets [Section 50]:

As already discussed under the chapter on ‘Profits and gains of business and profession’, all depreciable assets except in case of electricity companies are part of block of assets.

Where the full value of the consideration as a result of the transfer of any part or entire block of asset exceeds the cost of acquisition of that block of depreciable assets, there will be a capital gain, which will always be a short-term capital gain. The cost of acquisition of a block of depreciable assets is the written down value of the block at the beginning of the year plus actual cost of any asset falling within the same block, acquired during the year.

In other words, the excess of the sale consideration over the aggregate of the following three amounts shall be the short-term capital gain:

• Expenditure in connection with the transfer;
• The written down value of the block of assets in the beginning of the year;
• The actual cost of any asset falling within the block of asset acquired during the previous year.

As per section 56(1), income of every kind, which is not to be excluded from the total income under this Act, shall be chargeable to income-tax under the head “Income from Other Sources” if it is not chargeable to Income-tax under any of the first four heads specified in Section 14.

In other words, the following conditions must be satisfied before an income can be taxed under the head “Income from Other Sources”:

• There must be an income;
• Such income is not exempt under the provisions of this Act;
• Such income is not chargeable to tax under any first four heads viz., “Income from Salary”, “Income from House Property”, “Profits and Gains of Business or Profession” and “Income from Capital Gain”.

Income from other sources is, therefore, a residuary head of income.

• Building or Land Appurtenant thereto. The scope of this head of income is limited to the income from buildings or lands appurtenant (attached or situated in the vicinity of building) to buildings only. Buildings include residential houses, bungalows, docks, warehouses, any block of bricks or stone work covered by a roof etc. Land which is not appurtenant to any buildings does not come within the scope of this section.
• Annual Value. The meaning of word ‘Annual value’ is very significant because the annual value of the building or land appurtenant thereto is to be taxed and not the rent received. The annual value is to be determined according to the provisions of section 23 of Income-tax Act. These are discussed later in this chapter.
• The Assessee should be the owner of the property. It is only the owner of the house property who can be taxed under this head of income. The tax under this section is in respect of the legal or beneficial owner and not the occupation or possession of house property’. Therefore, income from subletting, will be chargeable under the head ‘Income from other sources’ and not under house property’. So only the owner, may be legal or deemed owner, is liable to tax under this head of income, unless the house property is used by him for the purposes of his own business or profession.
• The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income- tax, shall be chargeable to income tax under the head” Income from house property”.

1) The property should be consisting of any building or land apparent thereto.

• Income from letting vacant land is chargeable to tax under “Income from Other source – Section 56” not under this head “Income from House Property – Section 22”.
• The purpose for which the building is used by the tenant is immaterial. Thus income from letting godown, shop, house, factory, showroom etc will be taxable under this head.

2) The assessee should be the owner of the property

• If the property is sublet by the lessee/tenant then the income from sublet received by the lessee/tenant should be chargeable to tax under “Income from Business/Profession – Section 28”, if the lessee/tenant is carrying on business of letting/subletting otherwise under “Income from Other Sources – Section 56”.
• Deemed Ownership.
• Co-ownership.
• Income from building made by tenant/lessee on leasehold land is taxable under this head.
• If there is any dispute regarding title of the property then the income shall be chargeable to tax in the hand of the recipients of income.

3) The property should not be used for Business/Profession carried on by the assessee himself of which profit is chargeable to tax.

• If the owner of the property is an individual/HUF who is a partner in a firm and such property is used by that firm for carrying of business/profession, then property is considered to be used for business purpose.
• If the property is owned by HUF and any members of the HUF is partner in his individual capacity then income shall be taxable under this head.
• If the property is let out by a person for any purpose which is incidental to business then property is considered to be used for business purpose.
  For Ex :- If an assessee gives his property to his employees, directors etc for purpose incidental to business , whether on rent or otherwise, then income from such property is taxable under “Income from     Business/Profession – Section 28”.
• If propery is given on rent for purpose like for marriage, organising fair etc then it is not taxable under this head but under “Income from Business/Profession – Section 28”
• If property is located outside India then also tax is computed under this head.

4) If the property is used by the assessee for a business of letting of properties then the income derived from such business has to be shown in the head “Income from Business/Profession”. 

STCG ( Short-term capital asset ) An asset held for a period of 36 months or less is a short-term capital asset. The criteria of 36 months have been reduced to 24 months for immovable properties such as land, building and house property from FY 2017-18. For instance, if you sell house property after holding it for a period of 24 months, any income arising will be treated as long-term capital gain provided that property is sold after 31st March 2017. 2. LTCG ( Long-term capital asset ) An asset that is held for more than 36 months is a long-term capital asset. The reduced period of the aforementioned 24 months is not applicable to movable property such as jewellery, debt-oriented mutual funds etc. They will be classified as a long-term capital asset if held for more than 36 months as earlier. Some assets are considered short-term capital assets when these are held for 12 months or less. This rule is applicable if the date of transfer is after 10th July 2014 (irrespective of what the date of purchase is). The assets are:

1. Equity or preference shares in a company listed on a recognized stock exchange in India
2. Securities (like debentures, bonds, govt securities etc.) listed on a recognized stock exchange in India
3. Units of UTI, whether quoted or not
4. Units of equity oriented mutual fund, whether quoted or not
5. Zero coupon bonds, whether quoted or not

Capital asset is held for more than 12 months it shall be treated as long term capital asset

• Equity or preference shares held in a company listed in recognized stock exchange in India
• Any other security listed in recognized stock exchange in India
• Units of UTI (whether quoted or not)
• Units of an equity-oriented fund
• Zero coupon bonds (whether quoted or not)
• Unlisted Equity or preference shares held in a company (if transfer of such shares takes place on or before 10th July, 2014)
• Units of mutual fund specified under section 10(23D) other than equity oriented fund (whether quoted or not, if transfer of such shares takes place on or before 10th July, 2014)

The receipts/incomes which are chargeable to tax under the head Income from Other Sources include the following:

(i) Interest on Bank Deposits, Loans or Company Deposits, Securities

(ii) Income from letting out of Machinery, Plant or Furniture etc. and also land which is inseparable from such machines, plant or furniture (if it is not chargeable as income from business/profession)

(iii) Any sum received under Key-man Insurance Policy including Bonus, if not charged under the head “Business or Profession” or “Salary”.

(iv) Winning from Lotteries, Crossword Puzzles, Races including Horse Races, Card Games and Other Games of any sort or from Gambling or Betting of any form or nature etc.

(v) Any sum received by employer from his/her/it’s employees as contributions to any provident fund or Superannuation fund or fund under ESI Act or any other fund for the welfare of such employees, but not deposited in the employee’s a/c by the due date of deposit.

(vi) When a closely held company issues its shares at a price which is more than its fair market value, the amount received by the company in excess of fair market value.

(vii) Income by way of Interest received on compensation or on enhanced compensation.

(viii) Any sum of money received by the transferor as an advance or otherwise in the course of negotiations for transfer of a capital asset which is not finally transferred and such advance is forfeited due to breach of contract on the part of transferee.

(ix) Any sum exceeding Rs.50,000/- received by any person without any consideration.

(x) For transfer of immovable property whose stamp value exceeds Rs. 50,000

a) The whole of stamp value, if consideration for transfer is nil; and

b) Where the stamps value is less than the consideration paid, the difference between the stamp value and the consideration paid is treated as income of the seller.

(xi) For transfer of movable property whose fair market value exceeds Rs. 50,000

a) The whole of fair market value, if consideration for transfer is nil; and

b) Where the fair market value is less than the consideration paid, the difference between the fair market value and the consideration paid is treated as income of the seller.

However, the sum of money or any other property received from any relative [means Spouse/ Brother/ Sister/ Brother or Sister of the Spouse/ Brother or Sister of either of the Parents/Any Lineal Ascendant or Descendant/ Any Lineal Ascendant or Descendant of the Spouse/ of the Individual] or on the occasion of marriage of the individual or under a will or inheritance or in contemplation of death of the payer/donor or from any local authority [as per section 10(20)] or from a fund/foundation/university/other educational institution/hospital/medical institution/any trust, institution referred to in clause(23C) of section 10 or any trust, institution registered u/s. 12AA, or from an individual by a trust created or established solely for the benefit of relative of the individual shall not be treated as an income from other sources.

(xii) Any compensation or other payment, due to or received by any person, by whatever name called, in connection with the termination of his employment or the modification of the terms and conditions relating thereto.

(xiii) Family Pension (received by legal heirs of an employee).

(xiv) Income from sub-letting of house property by a tenant.

(xv) Agricultural income from agricultural land situated outside India.

(xvi) Interest received from Income Tax department on delayed refunds.

(xvii) Remuneration received by Members of Parliament

(xviii) Casual Receipts and Receipts of non-recurring nature.

(xix) Income from Royalty, Insurance Commission

(xx) Examiner-ship Fees received by a teacher (not from employer).

(xxi) Director’s Commission for Standing as Guarantor to Bankers.

(xxii) Dividend on shares (if dividend distribution tax has not been paid.)

• Rent, rates, taxes, repairs and insurance for owned buildings as well as buildings taken on rent (Section 30)

It is to be noted that the above-mentioned expenditure shall not be the Capital Expenditure.

• Repairs and insurance of machinery, plant and furniture (Section 31)

 It is to be noted that the above-mentioned expenditure shall not be the Capital Expenditure.

• Depreciation on capital assets (Section 32):

All assessee can claim the depreciation on capital assets as deduction under this section. The condition to claim the deduction is :

(i) Asset must be owned by the assessee or if asset is on lease then assessee can claim the depreciation on cost incurred upon the improvement or renovation etc.

(ii) Asset must be used for business purpose, if asset is used partly for residential purpose and partly for business purpose, then deduction available of depreciation on asset use for business purpose.

• Expenditure on Scientific Research (Section 35)
• Amortisation of preliminary Expenses (Section 35D):

If an Indian company or resident non-corporate assessee have incurred some expenses before the commencement of the business is eligible to take deduction after the commencement of the business by amortised the amount in each year.

• Premium paid in respect of insurance against risk of damage or destruction of stocks / stores used for business or profession [Section 36(1)(i)]
• Medical Insurance paid by the employers [Section 36(1) (ib)]
• Bonus or commission paid to employees [Section 36(1)(ii)]
• Interest on borrowed Capital [Section 36(1)(iii)]:

If an assessee has taken the business or profession loan, then he is eligible to take the deduction of interest amount paid on such borrowing under this section.

• Contributions to recognized provident fund and superannuation fund [Section 36(1)(iv)]
• Contributions to approved gratuity fund [Section 36(1)(v)]
• Employees contributions to staff welfare schemes [Section 36(1)(va)]
• Bad Debts [Section 36(1)(vii)]
• Banking Cash Transaction Tax [Section 36(1)(xiii)]
• Securities Transaction Tax [Section 36(1)(xv)]
• Commodities Transaction Tax [Section 36(1)(xvi)]
• Any Other Expenses not being personal or capital expenditure mentioned under section 30 to 36 of Income Tax Act, incurred wholly and exclusively for business (Section 37(1))
• Expenditure on Advertisement (Section 37(2B)):

If any expenditure is incurred in respect of advertisement of any political party is not allowed as deduction under income tax. Any other expenses related to advertisement can be claimed as deduction.