1. Acknowledgement
IIt gives us heartily pleasure and great satisfaction to presentt gives us heartily pleasure and great satisfaction to present
this project. We have endeavored to present this project in mostthis project. We have endeavored to present this project in most
suitable and lucid form. We completed this project in every mannersuitable and lucid form. We completed this project in every manner
by putting equal efforts & hard work before due date.by putting equal efforts & hard work before due date.
At the outset of this project we would like to thank ourAt the outset of this project we would like to thank our Prof.Prof.
Nishikant SirNishikant Sir for encouragement and giving us opportunity to dofor encouragement and giving us opportunity to do
such an innovative project in the subject ofsuch an innovative project in the subject of Income From OtherIncome From Other
SourcesSources.. We have taken special care to make this project perfectWe have taken special care to make this project perfect
understanding tools of other sources income, its structure Performa &understanding tools of other sources income, its structure Performa &
deep knowledge.deep knowledge.
We would like to thank our group members for putting equalWe would like to thank our group members for putting equal
efforts & hard works for preparation of this project. And also thanks toefforts & hard works for preparation of this project. And also thanks to
our library staff for giving required books whenever demanded.our library staff for giving required books whenever demanded.
We hope that this project gives you a great satisfaction &We hope that this project gives you a great satisfaction &
pleasure. Finally we welcome the comments & suggestion from youpleasure. Finally we welcome the comments & suggestion from you
& students, which will helps us to improve the next project.& students, which will helps us to improve the next project.

2. .
About tax
The Indian Taxation Enquiry Commission has defined Taxation, as "Taxes are
compulsory contribution towards common expenditure without any guarantee of definite
measured service in return."
Tax is compulsory payment levied on the person or companies to meet the
expenditure incurred on conferring common benefit upon the people of a country. A fund
raised through various taxes is referred as tax revenue. On the other hand public income
received through administration, commercial enterprises, gifts, grants etc. are sources of
non tax revenue of the government.
According to the Dalton" A tax is compulsory charge imposed by public authority."
There are two important aspects of taxes
1) Tax is compulsory payment and no one can to refuse to pay it.
2) Proceeds from taxes are used for the common benefit or general purpose of the state.
Taxes v/s fees
Fesses are compulsory payment made by the people who receive a particular
benefit or service in return from the government. The government for providing certain
services to the people charges fees. for e.g. court fees, pass port fees, License fees for
issuing the driving license, import license etc.
The amount of the fees is always less than the cost of services rendered by the
government in return. The government pays fees in return. Those who receive some
special advantages pay fees. There exists quid pro quo so fees are differs from taxes
A good tax system must fulfill certain principle if it is raised
adequate revenue and fulfill certain social objectives. According to
cannon of equality every person should pay to the government
according to his ability to pay that is in proportion of the income or
revenue he gets. In other words we can say that the burden of
taxation must be distributed equally in relation to ability of taxpayer.
Equity demands that rich people should bear a heavier burden of tax
and poor people bear a less burden.

3. INCOME FROM OTHER SOURCES.
Introduction:
Income from other sources is the last head of the income under which the total income is
computed and assessed. Income of every kind, which is not exempted from tax, must be
charged to tax by classifying under a proper head of the income. Any such income if it
cannot be classified or cannot be included under the head of salaries, income from house
property, profit or gain of business or profession and capital gains, shall be included
under the head 'income from other sources' as a matter of last resort. Thus, this is a
residual head of the income.
DEDUCTION ALLOWABLE WHILE COMPUTING 'INCOME FROM OTHER
SOURCES [U/S. (57)]
1) In case of income by way of the dividend and interest on securities.
a) Collection charges:
Any reasonable sum paid for the collection or realization of dividend or interest e.g.
bank charges or bank commission or where person holds a number of investments,
salary paid to a person in charge of collecting or banking dividend or interest. It
should be noted that the expenses so claimed, as deduction should be reasonable.
b) Interest on borrowed capital.
Interest on loans borrowed for purchasing shares and securities is allowed as a
deduction.
2) In case of income from hire:
Where the assesses gives on hire machinery, plant or furniture belonging to him,
where is not his regular business, such hire income is taxable under this head.
Similarly, where an assesses lets on hire these things along with building, and the
entire rent income is inseparable, such hire income is also taxed under this head. If
the thing activity is a regularly, the income would be dealt with, not under this head,
but under the head 'profit and Gains of business.'
If it is assessed as 'income from other sources' the following deduction are allowable.
Rent, Rates and taxes in respect of building.
Current repairs to building and plant, machinery or furniture.
Premium for insurance of building, plant, machinery or furniture.
Depreciation.

4. 3) Deduction in respect of employee contribution towards staff welfare schemes.
The employee 'contribution to provident fund, superannualation fund, employee
state insurance scheme etc.is to be included in the income of the employer as seen
above. The employee is in turn allowed deduction only in respect of such sums
actually credited to employees account, before the due date. thus the employers
failing to deposits within the due date such contribution collected from the
employees is taxed on such amounts.
4) Standard Deduction in the case of Family pension.
Family pension mean a regular monthly amount paid by the employer to a family
members of an employee in the events of the employees death. In the case of the
income in the nature of family pension, a deduction 1/3rd
of such income of Rs.
15,000 whichever is less.
5) Any other Expenses for Earning Income
Any other expenditure which is not in the nature of capital expenditure, is paid
out or expended whollaly and exclusively for the purpose of making or earning
such income for example-
Expenses incurred by an author for preparation of manuscript of the book.
Rent paid in respect of a building or premises sub let.
Salary paid to clerk etc. For maintaining accounts in respect of income
taxable under this head.
Amount Not Deductible [Section 58]
This section state the following amounts which shall not be deductible in computing the
income chargeable under the head, Income from other sources'
In case of any assessee-
1. Personal expenses of the assessee.
2. Any interest paid outside India which tax has not been deducted at sources in such
cases, interest paid or payable will not allowed as deduction.
3. Any amount of taxable salary, paid outside India without deduction of tax art
sources or no tax has been paid thereon, will not allowed as deduction.
4. Any expenditure at allowance in connection with income by way of winning from
lotteries, crosswords puzzles, race including horse races, card game play win or
another game of any sorts or from gambling or betting of any from or nature will
not be allowed as deduction. However, incase of income from horse races, the
expenditure incurred to maintain the horses shall be allowed as deduction to the
assessee being the owner of the horses maintained by him for running in horses
races.

5. EXEMPT INCOME
1) Amount received under a Life Insurance Policy section 10(10D)
Any sum received under the life insurance policy including Bonus is exempt from tax.
However amount received under a policy covered by section 80DDA or under Key man
insurance policy is not exempt.
2) Daily allowance of M.P./M.L.A./M.I.C. Section 10 (17)
This exempted is in respect of-
 Daily allowance received by a member of parliament (M.P) or of a Legislative
Assembly (M.L.A.)
 Any allowance received by M.P. under the member of Parliaments (constituency
allowance) rules 1986
 Any notified allowance received by M.L.A. up to Rs. 2000
3) Awards in public interest section 10 (17A)
The exemption is in respect of -
a) Any payment made whether in cash or kind.
b) As an award, institute in public interest by the Central/State Governments or any
other body and approved by the central Governments.
c) Or as a reward by the central, State Governments for such purpose as may be
approved by the central Governments.
4) Payment from provident fund [u/s 10 (11)]
Any payment from a provident fund to which the provided fund act 1925 applies or from
any other provident fund set up by the central Governments and notified in the official
Gazette (e.g. Provident Fund) is totally exempted from the tax.
Important points relating to income from other sources.
1) Winnings from lotteries, crosswords puzzles, card game and other games,
gambling or betting, races including horse races.
The gross winning from lottery, crosswords puzzle, card game, gambling or betting of
any nature, races including horse races (without deducting any expenses or allowances)
shall be include in the income.
2) Fund of Employees
Sums received by the assesses from the employees or deducted from their salaries as
contribution to any provident fund or superannuating fund or any fund under Employees
State Insurance Act, 1948 or any other fund for the welfare of such employee, but if the
employer deposits the amount within the prescribe time in the employees fund account, it
will not be taxes in the employer's hands. It will be included in his income and then it
will be deducted.

6. 3) Hire of Machinery, Plant etc.
Income from machinery, plant and furniture belonging to the assesses and let on hire. If
his income is not chargeable tax under the head 'profit and Gain of Business or
Profession', it will be taxed as income from other sources.
If the business as a whole is let out, the income (rent) would be assessable as income
from other sources. If only the commercial assets are leased out, the income would be
income from business.
4) Hire of Machinery, Plant and Building not separately.
If an assesses lets on hire machinery, plant or furniture belonging to him and also
building and the letting of the buildings is inseparable from the letting of the said
machinery, plant or furniture, the income from such letting, if it is not chargeable to
income tax under the head 'Profit and Gains of Business or Profession', it will be taxed
under the head "other sources'
5) Interest on Kisan Vikas Patra
Interest on such Kisan Vikas Patra is taxable under the head of 'other sources' Interest
accrued every year is calculated on the basis of the table. NO deduction under the section
80L is allowable on this interest.
6) Interest on National saving Certificates VIII issues
Interest on NSC is a taxable under the head 'other sources' It is calculated on the basis of
a table. Such interest is eligible for deduction u/s 80L.
Besides the above, there are some other incomes, which are also chargeable under
the heads “income from other sources”. For example:
(1) Any fees or commission received by an employee from a person other than his
employer.
(2) Any annuity received under a will. It does not include an annuity received by an
employee from his employer.
(3) All interest other than interest on securities, e.g., interest on bank deposits, interest
on loan, ect.
(4) Income of a tenant from sub-letting the whole or a part of the house property.
(5) Remuneration received by a teacher or a lawyer for doing examination work.
(6) Income of royalty.
(7) Director’s fees.
(8) Rent of land not appurtenant to any building.
(9) Agriculture income from land situated outside India.
(10) Income from markets, ferries and fisheries, ect.
(11) Income from leasehold property.
(12) Remuneration received for writing articles in journals.
(13) Income from undisclosed sources:
(i) Cash credits, which are unexplained (sec. 68).
(ii) Unexplained investments (sec. 69).

7. (iii) Unexplained money (sec. 69a).
(iv) Unexplained expenditure (sec. 69c).
(v) Amount borrowed or repaid on hundi otherwise than through an account
payee cheque drawn on a bank.
(14) Interest received by an employee on his own contributions to an unrecognized
provident fund.
(15) Casual income.
(16) Salary of a member of parliament, member of legislative assembly or council.
(17) Interest received on securities of co-operative society.
(18) Family pension received by the window and heirs of deceased employees.
However, pension received by the window of an employee of the u.n.o.is exempt.
Similarly the family pension of gallantry awardees is exempt u/s 10(18).
(19) Amount withdrawn from deposit in national saving scheme, 1987 on which
deduction u/s 80cca has been allowed including interest there on.
(20) Director’s commission for giving guarantee to bank.
(21) Director’s commission for underwriting shares of a new company.
(22) Insurance commission not chargeable under the head ‘business or profession’.
(23) Gratuity received by a director who is not an employee of the company.
(24) Tips received by a waiter or taxi-driver, not being given by his employer.
(25) Tax paid by an Indian company on behalf of a foreigner who was sent to india by
a foreign company with whom the collaborating company had entered into an
agreement, was income of the foreigner taxable under the head ‘income from other
sources’ because the assesses was not an employee of Indian company.
(26) Receipts by cricketers selected to play for India
(a) Test matches in India. Amount actually received by the player from the
cricket council board is taxable after allowing a deduction of an amount equal
to 75% of such receipt in respect of reasonable expenses incurred to earn
such income.
(b) Other matches in India. Generally. the entire receipts by the player (from the
board) will be deemed to have been spent for earning such income and hence
not taxable.
(c) Matches outside India. A player will be allowed a deduction of 50% of the
amount received for playing in foreign countries and the balances will be
taxable.

8. Illustration 1:
Mr. William is a Non-resident. He was earned following Amount during the previous
year ended 31st March 2003
(a) Income from agriculture land in sri lanka Rs. 1,50,000 received in sri lanks.
(b) Dividend from foreign companies received Rs. 5,000
(c) Dividend from Indian companies Indian companies received
1) Final dividend from Sagar construction Ltd. Rs. 15,000
2) Interim dividend from Reliance Ltd. Rs.12,400 was actually paid up by the company
on 30th June 2003.
d) Winning from the lotteries Rs.1, 00,000 (t.d.s. Rs.35, 000)
e) As on 1st April 2001 his investment was as following:-
 10% Mumbai Municipal Debenture Rs. 50,000/-
 15% Debenture in Telco Ltd. of Rs. 1,00,000/-
 8% ports trust Bonds of Rs. 30,000
 9% Maharashtra Government loan of Rs. 40000/-
Compute the Gross total Income of Mr. William for the assessment year 2003-04
Name of Assessee-Mr.William
Legal Status-Individual
Residential Status-Non-Resident
P/y-2001/02 Computation of Income A/y 2002-03
Particular Rs. Rs.
Dividend from Foreign Companies
Winning From Lotteries
Mumbai Municipal Debenture
Debenture in Telco Ltd.
Port Trust Bond
Maharashtra Government Loan
5,000
1,00,000
5,000
15,000
2,400
3,600
Net Taxable Income From Other Sources 1,31,000
Note:-
1) Income From Agriculture from Sri Lanka it is an Income Accrued arises received out
of India. Hence it is exempted because he is Non-resident
2) Income from Indian Companies not taxable even to the Nonresident.

9. Illustration:2
Mrs. "Tina Waz" submits the following particulars for computations of his Income
chargeable under the head of Income from other sources.
a) Dividend from Pallavi Ltd. a Foreign Company: - Net Rs. 10,000 Tax Deducted at
sources: Rs.4, 000, Interest paid on loan taken for the purpose of investment in share of
Pallavi Ltd. Rs. 1,500. Collection charge Debited by bank for realization of the Dividend
Cheque Rs 100/-
B) Rent for letting plant & Machinery on hire's Rs. 60,000. Collection charge in respect
of rent Rs. 3000 Fire Insurance Premium Rs4000. Repairs and Maintenance Rs 2,500.
Depreciation as per Income Tax rules Rs. 10,000
d) Winning From Horse Races
Solution:
Name of Assessee-Mrs "Tina Vaz"
Legal Status-Individual
Residential Status- 'R' & 'OR'
P/y-2001/02 Computation of Income A/y 2002-03
Particular Rs. Rs.
I Dividend from Foreign Company
Gross Dividend (10,000 + 2,000)
(-) Deduction (Interest on loan)
(-) Collection Charges
12,000
1,500
100
10,400
II Hire charges of Machinery
(-) Deduction
1. Collection Charges
2. Fire Insurance Premium
3. Repairs & Maintainans
4. Depreciation as per Income Tax rule
60,000
(3,000)
(4,000)
(2,500)
(10,000)
40,500
III Winning from Horse Race 5,000
Taxable Income from other sources. 55,000

10. Illustration:2
Mrs. "Tina Waz" submits the following particulars for computations of his Income
chargeable under the head of Income from other sources.
a) Dividend from Pallavi Ltd. a Foreign Company: - Net Rs. 10,000 Tax Deducted at
sources: Rs.4, 000, Interest paid on loan taken for the purpose of investment in share of
Pallavi Ltd. Rs. 1,500. Collection charge Debited by bank for realization of the Dividend
Cheque Rs 100/-
B) Rent for letting plant & Machinery on hire's Rs. 60,000. Collection charge in respect
of rent Rs. 3000 Fire Insurance Premium Rs4000. Repairs and Maintenance Rs 2,500.
Depreciation as per Income Tax rules Rs. 10,000
d) Winning From Horse Races
Solution:
Name of Assessee-Mrs "Tina Vaz"
Legal Status-Individual
Residential Status- 'R' & 'OR'
P/y-2001/02 Computation of Income A/y 2002-03
Particular Rs. Rs.
I Dividend from Foreign Company
Gross Dividend (10,000 + 2,000)
(-) Deduction (Interest on loan)
(-) Collection Charges
12,000
1,500
100
10,400
II Hire charges of Machinery
(-) Deduction
1. Collection Charges
2. Fire Insurance Premium
3. Repairs & Maintainans
4. Depreciation as per Income Tax rule
60,000
(3,000)
(4,000)
(2,500)
(10,000)
40,500
III Winning from Horse Race 5,000
Taxable Income from other sources. 55,000