Income from Other Sources Under Section 56(1)
25 June 2015
Income from other sources – Section 56(1)
Income from other sources is the last and residual head of income. A source of income that does not specifically fall under any one of the other four heads of income (viz., “Salaries ”, income from house property ”, profits and gain of business or profession ’’, Capital gain ’’) is to be computed and brought to charge under section 56 under the head ’’Income from other source’’.
To put the aforesaid matter differently, the residuary heads of income can be invoked only if all the following conditions are satisfied: -
1. Income –There is an income.
2. Income shall not be exempt – That income is not exempt from tax under section 10 to 13 A.
3. Not covered by other heads -That income is neither salary income, nor income from house property, nor income from business /profession, and neither capital gains. These four categories of income are not chargeable to tax under head ‘‘Income from other sources’’.
If the above three condition are satisfied, the income is taxable under section 56(1) under head ‘‘Income from other sources’’. Following are the popular and most common incomes that are offered for tax under the head “income from other sources”
- Income from subletting;
- Interest on bank deposits and loans;
- Income from royalty (if it is not an income from business/profession);
- Director’s fee;
- Ground rent;
- Agriculture income from a place outside India;
- Directors ‘s commission for standing as guarantor to bankers;
- Director’s commission underwriting shares of new company;
- Examination fees received by a teacher from a person other than his employer
- Rent of plot of land
- Insurance commission;
- Mining rent and royalties
- Casual income;
- Annuity payable a will, contact trust deed (excluding annuity payable by employer which is chargeable under the head ‘’
- Salary to payable to member of parliament;
- Interest on securities issued by a foreign Government;
- Family pension received by family members of a deceased employee;
- In case of retirement, interest on employee’s contribution if provident fund is unrecognized;
- Income from undisclosed sources;
- Gratuity paid to a director who is not an employee of the company;
- Income from racing establishments;
- Compensation received for use of business assets;
- Annuity payable to the lender of a trademark.
Income chargeable under this head is computed in accordance with the method of accounting regularly employed by the taxpayer. For instance, if book of accounts are kept on basis of mercantile system, income is taxable and expenditure is deductible on ‘‘due basis, whereas if books of account are kept on the basis of cash system, income is taxable on ‘‘receipt ’’basis and expenditure is deductible on ‘‘payment ’’basis.