Section 57 of the Income-tax Act – Income from Other Sources
It is quite likely that many entities – individuals as well as businesses – have multiple sources of income. In fact, the Income Tax Act, 1961 lays down five major categories of income sources – ‘Income from salaries’, ‘House property income’, ‘Profits and gains from business and profession’, ‘Capital gains income’, and ‘income from other sources’. Section 57 of the Income Tax Act lays down the rules pertaining to taxation of ‘income from other sources’, including deductions, terms & conditions, and more.
What is Income from Other Sources?
Any residuary income, which does not fit under the first four categories of income, but must be included in the total income for tax computation purposes, is considered to be ‘income from other sources’. For example, the interest you earn from your bank savings or profits made from an investment in securities, could be classified as ‘income from other sources’. Even winnings from lotteries or gambling and contributions to welfare schemes, or retirement funds will qualify for tax exemption under this head.
The Income Tax Act has made available some deductions that may be enjoyed on the taxation of your Income from Other Sources. Let us explore this in detail.
Tax Deduction on Income From Other Sources
You can get the following deductions us 57 of the Income Tax Act against your income from other sources:
1. Interest or Dividend Earned on Securities [Section 57(i)]
This includes any amount that is paid to a banker or any other person as remuneration or commission for collecting the interest or dividend on the taxpayer’s behalf.
2. Employee’s Contribution Towards Various Welfare Schemes [Section 57(ia)]
This section allows tax deduction on an employee’s contribution to any welfare scheme, such as a Superannuation Fund, a Provident Fund, an ESI Fund, etc., provided it does not qualify as profit from a business or a profession. However, the amount must be contributed to the welfare scheme on or before the given due date to be considered as tax-exempt.
3. Expenses Related to Income Earned by Way of Rent from Letting out Plant, Machinery, Building, or Furniture [Section 57(ii)]
If you have incurred any expenses on repairs, taxes, or insurance for any plant, building, machinery, or furniture that you have let out, you can claim a deduction on the same. Additionally, any depreciation charged on these assets is also tax-deductible. However, only the owner of such an asset can claim a deduction on its depreciation.
4. Income from Family Pension [Section 57(iia)]
In case you receive a family pension, which is given to the children or the widowed spouse of a pensioner who has been deceased, you can claim the amount which is lesser of the two as deduction:
- ₹15,000
- One-third of the family pension amount
5. Any Other Income Source [Section 57(iii)]
You can claim a deduction under section 57 if you incur expenses (not a capital expenditure) meant solely for earning any other form of income, which does not fall under the other subsections of Section 57.
6. Interest from Compensation or Any Enhanced Compensation [Section 57(iv)]
If you earn an interest from any compensation or enhanced compensation, you can claim a tax deduction on half of this amount.
7. Income from Maintaining and Owning Race Horses [Section 58 (4)]
All expenses pertaining to maintenance of race horses can be claimed as deduction under this subsection.
While these were some of the deductions under section 57 of the Income Tax Act that you can claim, the following section details expenses that do not qualify for tax exemption under Section 57.
Also Read
Expenses Not Deducted Under Section 58
While Section 57 deals with taxation of ‘income from other sources’, the list of expenses incurred on earning income from other sources that you cannot claim as deduction is detailed under Section 58 of the Income Tax Act. These are as follows:
1. Section 58 (1)(a)(i)
Any personal expenses that you have incurred.
2. Section 58 (1)(a)(ii)
Interest that is payable outside India, provided no tax has been paid or deducted at source.
3. Section 58 (1)(a)(iii)
Salaries on which no tax is paid or deducted at source and that are payable outside India.
4. Section 58 (1A)
No deduction can be claimed on wealth tax.
6. Section 58 (2)
Expenses described under section 40(a) of the Income Tax Act.
7. Section 58 (4)
Earnings from lotteries, horse races, crossword puzzles, games, betting, or gambling will not qualify for deductions under Section 57 of the Income Tax Act.
Final Word
Section 57 of the Income Tax Act is dedicated to detailing the deductions available to taxpayers on their ‘income earned from other sources’. Exemptions allowed under Section 57 helps a taxpayer lower their tax obligations.
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FAQs
You can claim a deduction for your contribution to welfare schemes if you credit the amount on or before the due date.
No. Section 58 of the Income Tax Act expressly prohibits the deduction of any personal expenses related to deductions mentioned in section 57.
You can claim the lower of the two as a deduction for family pension: ₹15,000 or one-third of the actual family pension amount.
No, income from securities is not deductible under section 57. But, expenses incurred on collection charges paid to a banker, a broker, or any other authorised person, are deductible.
No. Section 58 clearly states that wealth tax in India is not deductible.
