Understanding Residuary Income and Taxable Sources
Residuary income, under section 56(1), includes all income not excluded from total income and subjected to income tax under "Income from other sources." Certain specific incomes listed in section 56(2) are taxable, such as dividends, winnings, employee contributions, interest on securities, and income from letting machinery or buildings. Gifts or inadequate consideration over Rs. 50,000 received post-1.10.2009 by an individual or HUF are also taxable.
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Income from other sources
Income from other sources-this is a residuary head of income, because as per sec. 56(1), income of every kind, which is not to be excluded from the total income under this act, shall be chargeable to income tax under the head income from other sources if it is not chargeable to income tax under any of the first four heads specified in section 14. The following condition must be satisfied before an income can be taxed under this head: 1-There must be an income 2-Such income is not exempt under the provision of this act 3-Such income is not chargeable to tax under any first four head specified in section 14.
Many incomes which are taxable under the this head. However, sec. 56(2) enlists certain specific incomes which shall be chargeable to income tax under the head Income from other sources without prejudice to the generality of the provision of sub section (1) of 56. These are: Dividends, other than the dividends referred to in section 115-O,
Winnings from lotteries, crossword puzzles, races, including horse races, card games and other games of any short, or from gambling or betting of any form or nature whatsoever, and Any sum received by assessee from his employee as contribution to any provident fund, or any other welfare fund for the employees provided it is not taxable under the head profits ad gains of business or profession, Income by way of interest on securities provided the income is not chargeable to income tax under the head profits ad gains of business or profession, Income from machinery, plant or furniture belonging to the assessee and let on hire, provided the income is not chargeable to income tax under the head profits ad gains of business or profession,
Where the assessee lets on hire, the machinery, plant or furniture belonging to him and also buildings and letting of buildings, is inseparable from the letting of said machinery, plant or furniture, the income from such letting, if it is not chargeable to income tax under the head profits ad gains of business or profession, Any sum receive under the keyman insurance policy, including the sum allocated by way of bonus on such policy, if such income is not chargeable to income tax under the head profits ad gains of business or profession, Any sum of money, the aggregate value of which exceeds Rs. 50,000is received without consideration or property (whether property is movable or immovable) is received without consideration or movable property is received for an inadequate consideration by an individual or HUF on or after 1.10.2009, if the amount of such gift or inadequate consideration exceeds 50,000, [sec. 56(2)(vii)]
Any property being shares of a closely held company received without consideration or for inadequate consideration by the firm or a closely held company if aggregate value of the amount of such gift or inadequate consideration exceeds Rs. 50,000, [sec.(2)(viia)] Income by way of interest received on compensation or on enhances compensation to be tax in the year in which such interest is received. Note- These are incomes, which have been specified, in particular, to be chargeable under the head income from other sources.
Following are some of the other incomes which are normally chargeable to tax under this head because these are not covered under any of the four specified heads; Income from sub-letting of a house property by tenant; Casual income; Insurance commission; Family pension (payments received by a legal hires) Director s sitting fee for attending board meetings Interest on bank deposits or deposits with companies; Interest on loan
Income from undisclosed sources; Remuneration received by member of parliament; Interest on securities of foreign government; Examiner fees received by a teacher from an institution other than his employer Rent from a vacant plot of land Agricultural income from agricultural land situated out site of India Income from royalty, if it is not income from business and profession
Income from racing establishment Income from granting of mining rights Income from grant of grazing rights Income from markets, fisheries, right of ferry or moorings; Interest paid by the government on excess payment of advance tax; Gratuity received by a director who, under the relevant contract, is not an employee or servant of the company, assessable as income from other sources Note-Above numerated lists are not final. there so many other income which can include in this list if that income fulfill the condition of in this head.
