In case you earn a taxable income under Income from Other Sources, the income tax law in India provides you with an option to claim deductions against certain expenses. Section 57 of the I-T Act, 1961, lists these expenses against which tax deduction can be claimed on income earned from other sources. Before we move forward, it is pertinent to understand what income from other sources mean.
See also: Income from other sources: Definition, types and applicable tax rates
What is Income from Other Sources?
Income is taxed based on its source. To this effect, income tax is divided into following five categories:
- Income from salary
- Income from house property
- Income from profits and gains from business, or profession
- Income from capital gains
- Income from other sources
Income from other sources is that amount that does not fall under the four other income categories. According to Section 56, sub-section (2) of the I-T Act, income from other sources may include income from lottery, gambling, card games, sports rewards, bank deposits, etc. But, if these incomes are earned as a part of your business, or profession, it will be taxed under profits and gains from business or profession, and not income from other sources. For individual taxpayers in India, income from other sources often includes interest earned on savings and investments from bank accounts, fixed deposits, recurring deposits, and dividends earned from investments made in India.
Know about: income tax deduction for salaried employees
Tax deductions on income from other sources
Various clauses of Section 57 talk about the deductions available when computing the income chargeable under Income from Other Sources.
| Applicable Section | Nature of income | Deduction allowed |
| 57 (I)* | Dividend or interest on securities | Any reasonable sum paid by way of commission, or remuneration to banker, or any other person for purpose of realizing dividend, or interest on securities |
| 57 (IA) | Employees’ contribution towards Provident Fund, Superannuation Fund, ESI Fund, or any other fund setup for the welfare of such employees | If employees’ contribution is credited to their account in relevant fund on, or before the due date |
| 57 (II) | Rental income letting of plant, machinery, furniture, or building | Rent, rates, taxes, repairs, insurance, and depreciation, etc. |
| 57 (IIA) | Family pension | 1/3rd of family pension subject to maximum of Rs. 15,000 |
| 57 (III) | Any other income | Any other expenditure (not being capital expenditure) expended wholly and exclusively for earning such income |
| 57 (IV) | Interest on compensation, or enhanced compensation | 50% of such interest (subject to certain conditions) |
| 58 (4) | Income from activity of owning and maintaining racehorses | All expenditure relating to such activity |
Expenses that can’t be claimed as deduction under Section 58
The following expenses are not allowed to be deducted under income from other sources:
- Personal expenses
- Interest chargeable to tax payable outside India, on which tax has not been paid, or deducted at source
- ‘Salaries’ payable outside India, on which no tax is paid, or deducted at source
- Wealth-tax
- Expenditure of the nature specified in Section 40A
- Expenditure in connection with wins from lotteries, crossword puzzles, races, games, gambling, or betting
*Section 57(I) was amended with effect from April 1, 2021. Now, interest on money borrowed for investing in shares can be claimed as a deduction, capped at 20% of dividends, or income in respect of units of a mutual fund.
Latest update
Rent from sub-letting property taxable as income from other sources: ITAT
March 2023: Rent from sub-letting property is taxable as income from other sources, the Visakhapatnam Bench of the Income Tax Appellate Tribunal ( ITAT ) has said. The ITAT observation came on an appeal filed by an assessee, as against the order of the commissioner of income tax (appeals), the National Faceless Appeal Centre, Delhi.
FAQs
What are the five types of income tax?
The five types of income tax are:
*Income from salary
*Income from house property
*Income from profits and gains from business, or profession
*Income from capital gains
*Income from other sources
Which income qualifies to be “Income from Other Sources”?
According to the Income Tax (I-T) Department, any income which is not chargeable to be taxed under any other heads of income and not to be excluded from the total income shall be chargeable to be taxed as residuary income under “Income from Other Sources”.
What expenses are allowed as deduction on tax on income from other sources?
The following expenses are allowed as deduction on tax on income from other sources under various clauses of Section 57:
*Dividend or interest earned on tradable financial assets (securities)
* Deduction in the form of employees’ contribution towards welfare schemes
*Deduction in the form of expenditure incurred on rental income
*Standard deduction out of family pension Any other expenditure (not a capital expenditure, or personal expense)
*Deduction related to interest on compensation, or enhanced compensation
Do I need to report income from other sources on my tax return?
Yes, you are generally required to report income from other sources on your tax return
What are some examples of income from other sources in India?
In India, examples of income from other sources include: Interest Income: Interest earned on savings accounts, fixed deposits, recurring deposits, and bonds. Rental Income: Income received from renting out residential or commercial properties. Dividend Income: Income received from dividends on shares of companies. Lottery or Game Show Winnings: Any income earned from winning lotteries, game shows, or other competitions. Royalty Income: Income received from royalties for books, patents, copyrights, or artistic works. Income from Letting out machinery or plant: Income earned by letting out machinery, plant, furniture, or any other asset. Income from freelance or part-time work: Income earned from freelance work, consulting services, or part-time jobs not classified under any other head of income. Gifts and cash prizes: Income received as gifts, cash prizes, or rewards from various sources. Income from Peer-to-Peer Lending: Income earned from lending money through online platforms or peer-to-peer lending. Income from co-ownership of property: Income received from jointly owned properties, where you share the rental income with other co-owners.
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An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
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