A Guide On Section 56-59 Of The Income Tax Act: Income From Other Sources
Section 56-59 of the Income Tax Act deals with the taxation on any earnings that fall under the ‘Income from Other Sources’ head. Any income that is not chargeable under any head of income as mentioned in the IT Act, such as ‘Income from House Property’ and ‘Income from Salary’, but which is also not exempted from taxation, will be chargeable under ‘Income from Other Sources’ head.
Here’s a complete rundown of Section 56-59 of the IT Act.
Incomes Taxable under Section 56
The following list consists of various incomes that are taxable under Section 56 of the Income Tax Act:
- Any amount that you win from crossword puzzles, lotteries, horse races, gambling and other games
- Income from dividends
- Any amount that you receive from a superannuation fund or any type of fund that is set under the Employees’State Insurance Act if such an income is not taxable under ‘Income from profit and gains of business or profession’ head
- Income from interest on securities that are not taxable under ‘Profit and gains of business or profession’ head
- Any earnings from plants, machinery, furniture as well as buildings that you let on rent or hire that are not taxable under ‘Profit and gains of business or profession’ head
- Income that you receive from any kind of gifts
- Income obtained from sub-letting
- Ground rent
- Agricultural income from plots outside the country
- Interest from bank deposits
- A commission that a company director receives for underwriting shares
- Salaries that are received by MLAs or MPs
- Examination fee that a professor or teacher gets from any educational institution that is not his/her employer
- The interest you obtain from securities that are issued by a foreign government
- Interest received from the unrecognised provident fund of an employee, in case of his/her retirement
- Income from the family pension that the family members of the deceased employee receive
- Gratuity that a company director receives
- Any income that the assessee earns from an undisclosed source
Computation of Income from Other Sources
‘Income from Other Sources’ is usually calculated by deducting various expenses that you incur as specified in Section 57 from the income received and then disallowing certain specific expenses that are present in provisions of Section 58 of the IT Act. The allowable and disallowable expenses are as below:
Expenses allowed under Section 57 of the Income Tax Act
Here are some of the allowable expenses as per Section 57:
- For interest or dividend obtained on securities, any sum that is paid to a banker or other individual in the form of commission or remuneration for realising that interest or dividend
- For family pension, one-third of the total pension or Rs. 15,000, whichever would be lower
- In case of any income that you get as interest from compensation or enhanced compensation, an amount that is half of such income
- For any other income, expenses other than capital expenses that you incur for the purpose of earning that income which has been taxed in the previous year
- Any expenses that you incur for rent, insurance, and repairing of buildings, plants, or machinery that you have given on rent
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Expenses Disallowed under Section 58
As per Section 58 of the Income Tax Act, these are some of the disallowable expenses:
- Any expense or part of an expense that is private in nature
- Interest or salary that is payable outside the country which does not qualify for TDS deduction
- Payment of Wealth Tax
- Expenses regarding royalty or technical fees that you receive from a foreign company
- Expenses regarding winning lotteries, crossword puzzles, horse races, card games, gambling, betting or any other games
Different Chargeable Profits as Per Section 59
Let’s assume there has been a deduction or allowance during the computation of ‘Income from Other Sources for a particular year regarding losses or expenses that have been recovered subsequently through any kind of benefit. In such a case, the same amount will be taxed under ‘Income from Other Sources.’
Final Word
If you are a taxpayer with any kind of earnings from sources other than salary, business or profession, capital Gains, or house property, then you should be aware of the different types of other incomes as mentioned in Section 56-59 of the IT Act.
Frequently Asked Questions
Ans: A gift refers to an amount of money, immovable or movable property that you receive without any consideration.
According to Section 56(2) of the Income Tax Act, you are liable to pay taxes on the gifts that you receive. These gifts are taxable under the ‘Income from Other Sources’ head. The donor, however, does not have to pay any taxes.
Ans: The following qualifies as property under Section 56-59 of the Income Tax Act:
Securities and shares (securities would include debentures, bonds and others)
Building or land
Jewellery (This includes any ornament made of gold, silver, diamond, precious stone, or semi-precious stones. Those precious or semi-precious stones attached to furniture, utensils or apparel would also qualify as jewels)
Paintings
Archaeological collections
Any artwork
Bullion of the purest form
Ans: These are some of the gifts that will not qualify for taxation under the IT Act:
Any amount that you receive as a gift that does not exceed Rs. 50,000 in a financial year
Gifts that you receive from your relatives
Any gift you get for marriage, even from non-relatives
Amount you receive through a will
Any amount that you get from a local authority under Section 10(20)
Ans: According to Section 56(1), incomes of all kinds that are not excluded from total income will attract taxation under the ‘Income from Other Sources’ head if they are not subject to taxation under any of the four other heads of income as per Section 14.
Ans: When you receive any amount that is more than Rs. 50,000 from anyone other than particular relatives, the whole amount will be taxable. Moreover, immovable properties that you get without consideration have a stamp duty value exceeding Rs. 50,000, then the stamp duty value will be taxable.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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