Income Chargeable to Income tax under the head "Income From Other Sources" U/S 56(2)

 The following income shall be chargeable to income tax under head "Income From Other Sources":

1. Dividends

Any dividend income received from shares (domestic or foreign) is taxable under this head in the hands of the shareholder.
Note: Since April 2020, the Dividend Distribution Tax (DDT) was abolished, making dividends fully taxable for the recipient.

2. Winnings from Lotteries, Puzzles, etc.

Any winnings from:

  • Lotteries, crossword puzzles, races (including horse races).

  • Card games, gambling, or betting of any form.

  • Tax Rate: These are taxed at a flat rate of 30% (plus cess) under Section 115BB. No deductions or basic exemption limits apply to this income.

3. Gifts (The Most Common Sub-section)

Under Section 56(2)(x), if a person receives a gift, it is taxable if the value exceeds ₹50,000 in a year. This includes:

  • Sum of Money: If the total cash/cheque received exceeds ₹50,000.

  • Immovable Property (Land/Building): If received without consideration (gift) or for inadequate consideration (stamp duty value vs. purchase price).

  • Movable Property: Shares, jewelry, archaeological collections, drawings, paintings, etc.

Exceptions (Gifts are NOT taxable if received):

  • From a "Relative" (Spouse, siblings, linear ascendants/descendants).

  • On the occasion of the marriage of the individual.

  • Under a will or by way of inheritance.

  • In contemplation of the death of the donor.

  • From a local authority or registered charitable trust.

4. Share Premium in Excess of Fair Market Value (Angel Tax)

Section 56(2)(viib) applies when a closely held company issues shares to any person (resident or non-resident) at a price higher than the Fair Market Value (FMV). The difference between the issue price and the FMV is taxed as income for the company.

5. Interest on Securities

If interest on government bonds, debentures, or other securities is not charged under "Profits and Gains of Business or Profession" (PGBP), it is taxed here.

6. Income from Hiring of Machinery, Plant, or Furniture

If an individual lets out machinery, plant, or furniture on hire, and it is not their primary business, the income is taxed here.

  • Composite Rent: If a building is let out along with machinery/furniture and the two lettings are inseparable, the entire rent is taxed under IFOS.

7. Employee Contributions to Welfare Funds

If an employer receives contributions from employees for PF, ESI, etc., and does not deposit them into the employee's account by the due date, it is treated as the employer's income under IFOS (if not taxed under PGBP).

8. Compensation on Termination of Employment

Any compensation received in connection with the termination of employment or modification of terms of employment (which is not taxable under "Salaries") is taxed here.

9. Interest on Compensation or Enhanced Compensation

If the government pays interest on delayed compensation for compulsory acquisition of land/property, that interest is taxable in the year of receipt.

  • Note: A standard deduction of 50% is allowed on such interest.

10. Advance Money Forfeited

If an assessee had received advance money during negotiations for the transfer of a capital asset, but the deal failed and the money was forfeited, that forfeited amount is taxable under IFOS (applicable for forfeitures after April 1, 2014).

11. Sums received under a Keyman Insurance Policy

Any sum received (including bonus) under a Keyman Insurance Policy is taxable here if it has not already been taxed under "Salary" or "PGBP."

12. Income from Life Insurance Policies

If a sum received from a life insurance policy is not exempt under Section 10(10D) (e.g., because the premium exceeded the prescribed percentage of the sum assured), the income part is taxable under IFOS.

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