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Income from Other Sources includes incomes not classified under other heads like Salary, House Property, Business or Profession, & Capital Gains. Examples of such income include dividends, interest, lottery winnings, family pensions, etc. Section 57 provides deductions for expenses incurred in earning such an income. This includes income types such as dividends, interest income, family pensions, rental income from non-business assets, and compensation. The deductions aim to account for reasonable expenses incurred in earning such income.
Deduction for reasonable amounts paid as commission or compensation to bankers or others for realizing dividend/interest income. Reasonable expenses like commission or remuneration paid to a banker or other person for realizing dividends or interest are deductible. Amendment by Finance Act, 2020 (effective April 1, 2021):
Contributions to provident fund, superannuation fund, employee state insurance, etc., are included as income if not taxable under “Profits and Gains of Business or Profession.” If the employer deposits these contributions on or before the due date, such contributions are deductible. This ensures timely compliance and allows deduction of contributions under Income from Other Sources.
Expenses like repairs, insurance, and maintenance incurred on letting out plant, machinery, furniture, or buildings are deductible. Depreciation can only be claimed if the taxpayer owns the asset.
For family pensions, a standard deduction of one-third of the income or ₹25,000 (raised from ₹15,000 in Finance Act, 2024), whichever is lower, is allowed.
For interest on compensation or enhanced compensation, 50% of such interest is allowed as a deduction if specific conditions are satisfied.
As per Section 58, the following expenses are not deductible under Income from Other Sources:
Section 57 allows specific deductions from Income from Other Sources income, ensuring taxpayers can offset legitimate expenses incurred in earning such income. The provisions are subject to conditions and specific limitations (e.g., the 20% cap on interest for dividend income or the 50% limit for enhanced compensation interest). Taxpayers must maintain proper documentation to support these claims. Section 57 provides taxpayers the opportunity to deduct legitimate expenses incurred while earning income under Income from Other Sources. To ensure compliance:
These provisions help taxpayers reduce their taxable income effectively while adhering to statutory requirements.
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