INCOME FROM OTHER SOURCES AND ITS COMPUTATION

Basis of Charge: The following incomes are always taxable under the head
Income from Other Sources

Dividend income Casual income Sum received by assessee from his employees as contributions to any staff
welfare (If not taxable under the head Profits and Gains from Business/Profession Income)

Interest on Securities
Income from machinery, plant or furniture let on hire

 Income from letting of plant, machinery or furniture along with building,

where the letting of building is inseparable from letting of plant, machinery or furniture

Sum received under Keyman Insurance Policy including bonus Any sum of money received without consideration, i e. Gift received above
Rs 25,000 or more, the whole of such amount is taxable

Residuary incomes Income not falling under any other head.

 Residuary Income The following are the conditions, if satisfied, cover the
meaning of Residuary Income

There is Income
Income is not exempt from tax Income is not covered by any other heads Method of Accountancy If books of accounts are kept on mercantile
system, then, income is taxable and expenditure on due basis and if books of accounts are kept on cash basis, then income is taxable on receipt basis and expenditure is deductible on payment basis.

 Computation of each Income Winnings from lotteries, crossword puzzles, horse races and card games etc i)
Taxability - Winnings from lotteries, crossword puzzles, races including horse races, card games and games of nature of gambling, betting or of similar nature, is chargeable to tax under the head Income from Other Sources Only Winnings from lotteries, winnings from races, winnings from betting, etc are chargeable to tax. Hence, if a receipt is not a winning then it is not chargeable to tax. chargeable to tax at flat rate of 30% (plus surcharge plus education cess) on Gross Winnings ( without claiming any expenditure/allowance)

ii)

iii) Tax rate So, Winnings from lotteries, races, crossword puzzles etc are

 iv)

Table showing Grossing up process, in case of given Net Winnings

Source

Mode of Conversion

Net winnings from lotteries card games horse races or other games etc
Winnings from other races, gambling or betting

Net Amount 1 (0.30 + surcharge + education cess)

As no tax is reqd to be deducted, there is no difference between net and gross amounts

 Interest on Securities i)
Interest on security means

interest on any security of Central/State Government interest on debentures or other securities for money issued by or on behalf of
a local authority, company, corporation established by Central, State or Provincial Act

ii)

Basis of Charge Income in form of Interest on Security is taxable on receipt basis, if assessee maintains books on cash basis or Interest is taxable on accrual basis if assessee maintains books on mercantile basis.

iii)

Grossing up Interest Gross interest (Net Interest + TDS ) is taxable. Net Interest is grossed up if TDS has been deducted at source.

Grossing up Process = Net Interest x 100

100-TDS Rate

 Bond Washing Transaction : A transaction involving selling securities (to a friend or relative) before due
date and acquiring back the same (or similar) securities after due date of interest is over.

Generally, high-income class assessee adopt this to evade tax.

 Sales cum interest a. If an assessee having beneficial interest in securities sells them in such a
way that either no income is received or income received is less than sum he would have actually received.

b. Exceptions If there has been no avoidance of Income Tax or the

avoidance of Income Tax was exceptional and not systematic and there was no avoidance of Income Tax during 3 preceding PYs

c. Income from machinery, plant or furniture let on hire The hire charges
received/receivable on letting out of machinery, plant or furniture, is chargeable to tax under the head Income from Other Sources

 d. Income from composite letting of building, plant, machinery or

furniture (i) Hire charges received/receivable on letting out of building, inseparable from plant, machinery or furniture, and hence composite letting out hire charges is chargeable to tax under the head Income from Other Sources

(ii) If building is let out but other assets like plant, machinery or furniture
are not given on rent but certain facilities like lift service, air-conditioning service are provided, then, Composite letting out charges is not taxable under this head of Income.

e.

Receipts without consideration to be treated as income (Gift) -

Applicable for Individual or HUF Receipt amount is greater than Rs 25000 Transfer has taken place on or after Sept 2004 Sum received does not fall in exemption list Exceptions Money received before Sept 2004 Money received by way of consideration Money received from a relative Money received on occasion of marriage of individual

Money received under a will or inheritance

Money received under a contemplation of death of payer Money received is not exceeding Rs 25000.

 Note Meaning of relative Spouse, Brothers/Sisters of Individual,

Brother/Sister of Spouse, Brother/Sister of parents of Individual, lineal ascendant or descendant of Individual/Spouse

 f. Dividend

Meaning Amount paid to or received by a shareholder in proportion to his

shareholding in a company out of total sum so distributed

Following payments are deemed as dividend

a. Any distribution entailing release of companys assets

b. Any distribution of debentures, debenture-stock, deposit certificates and
bonus to preference shareholders

c. Any distribution on liquidation of company Any distribution on reduction of capital

Any payment of loan or advance by a closely held company to a

shareholder, holding substantial interest.

 Taxability: i) Dividend received from a domestic company Is not taxable ii) Dividend received from a non-domestic company Is taxable iii) Dividend covers Normal dividend, Deemed dividend or Interim
dividend.

Module-II Deduction and Exemptions Computation of Tax Liability

DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME

In computing the Total income of an assessee, the deductions specified from sections from be allowed from companies Gross Total income.
Gross Total Income means the total income computed in accordance with the provisions of the act, before making any deduction given here. However Brought forward losses shall be deducted from the income to arrive at the gross total income. The deduction in this chapter are not allowed against short term capital gains and long term capital gains.

Persons entitled to deductions: Only Companies are entitled to deduction under the following sections: 1) 80GGB 2) 80I-A: (a) Infrastructure facility (b) Telecommunication services, 3) 80I-B:(a) Hotel, (b) Scientific and Industrial research and development, 4) 80JJAA,

5) 80LA.

All assessees are entitled to deduction under the following sections except as mentioned in (2) and (3) of company. 1) 80G 7) 80-IC 2) 80GGA 3)80GGC, 8) 80-ID 9) 80-IE, 4)80IA, 5) 80-IAB 10) 80JJA. 6) 80-IB

DEDUCTIONS REGARDING CERTAIN PAYMENTS AT A GLANCE Persons entitled s/l Section to deduction Quantum of Deduction
100% of qualified Specified Donations of national Importance. 50% of other qualified donations

Payment Regarding
Payment Regarding charitable donation to approved funds or institutions

Conditions for deduction

Payment to be done in the form of Money only.

80G

All Assessees

2 80GGA

All Assessees

Payment to scientific Research Assn, or to a No income from 100% of amount paid. university or college etc.for business or scientific or statistical profession. research or RDP Whole Amount Contribution to political party Contribution to political party ---

3 80GGB Indian Company

Assessee except local 4 80GGC authority/person funded by Govt

Whole Amount

---

80-IAB:- Deduction in respect of profits and gains by an undertaking or enterprise engaged in development of Special economic Zone. Quantum of deduction 100% of the profit. 80IC:- Deduction in respect of profits and gains from undertaking or enterprise in Special Category States.

Quantum of deduction 100% of the profit.

80ID:- Deduction in respect of profits and gains from business of Hotels and Convention centre in specified area. Quantum of deduction 100% of the profit. 80IE:- Deduction in respect of profits and gains in respect of certain undertakings in North- Eastern States. Quantum of deduction 100% of the profit.

80-JJA:- Deduction in respect of profits from Business of collecting and processing of biodegradable waste. Quantum of deduction 100% of the profit. 80JJAA:- For an Indian company engaged in the manufacture or production of article or thing Deduction in respect of employment of new workmen. Quantum of deduction 30% of additional wages paid to the new regular workmen employed by the assessee during the previous year. 80LA:- Deduction in respect of certain incomes of offshore Banking units or International Financial Services Centre. Quantum of deduction 100% of the profit.

Computation of Tax on Companies

The rates of income tax for assessment years 2009-10 and 2010-11 are as under:-

I. In case of Domestic Company:i) Short term capital gains ii) Long term capital gains 15% 10%/20%

iii) Winnings from lotteries, races,card games etc

iv) Any other income

30%
30%

Surcharge @ 10% if total income exceeds one crore rupees.

Education cess @ 3%.

II. In the case of a company other than a domestic company i) On income from royalty received from Government or an Indian concern in pursuance of an agreement made after 31st March, 1961, but 1st April, 1976 50% ii) On income from fees for rendering technical services received from Government or an Indian concern in pursuance of an agreement made after 29th Feb,1963 but before 1st April, 1976 50% iii) Royalty or fee for technical services: If agreement made: a) after 31.3.1976 but before 1.6.1997 b) after 31.5.1997 but before 1.6.2005 c) after 31.5.2005 30% 20% 10%