Sources 10,000

other collected
se wsdividend
Deemed193. payee 5,000
byan company.
exempted 50,000
is the credited
interest
is from amount of games
in amount
secu an
to certain
companies. lotter
Winning
than
more
Govt. by it case
ws dividual of if10,000.
?upto of
TDS
No any alc
in ? paid
exceeding ? winningpuzzle card in
notifiedan
Interest
paid hands upto games
upto amount
on on for Dividend TDS
2(22)(c). recepient.
Dividend of betting.
Interest
curities.
Interest cheque Indian paid 10,000.
case if
the Bank Race andnot and
rity sortNO or
not or iesif In
in securities

Other 1. 2. 3. 4.
surchargel
statutory
issued Listed10%
bodies-10%
debentures
10%
5.
30%
10%
6. 7. 8. 9.

(non-govt.)
for
securities
Individual
TDS or debentures
Unlisted
TDS [No authority
Incomes
of acompany
of Bank
Interest free
RatesAOP
on

from HUF local

Interest
by
Casual
tax
on
interest
casual insurance
underof 15,000expenses
to whose ESIappropriate
employer
etc.period. authorities
by an or expenditure
expenditure
this
ex etc. col- personal
earn
1/3 under
57
uls any puzzles
Expenses
taken
commission, taxes or
taxable @or less. out fund to of
of asset iswhichever
and deduction
of pensionfirelocal by taxable
incurred
Income out races, charges
deduction
penditure
56(2).
/s
incomes,
Bank
loan

on an is
deduction
head.
this
income family
let paidprovident anotcapital
Depreciation
repairs,to
premium,
Amount is
relating
other
whichis income
lection acquire
Interest Any of and
date. head. after
Std. on to is
No 1.
B. 2. 4. 5. 6. received,
A. 3.
capitalreceivable compensation
theof employment
nature
Di crossword
games, with ofout
re ex machin rent contribution to com of
employer
conditions
account or
giftsnot business. and
along enhanced termination net,
Deemed fund. of in name.
card or is and machinery transfer revenueif
society. building ESI on or
56(2)
u/s
Incomes races, which
gift plant andits(xi) any only
received
companies, shows regular by their or forfeited terms TDS.
as 2020-21
lotteries,
or compensation for the to(2)or with done
cooperative betting.
gambling
andreceived of of and deducted fund relating
56capital

MUTUAL
negotiation

FUNDS
as compensation
with
securities.
on
Interest
game lettingletting
not plant salary the u/s calledbe of
56(v).
empted
ws providend money taxable to Rate
from from is inseparable.
is of
connection
T.V.amount during contract
modification
a be is
4.Any it from
from and amount employees'
from wherefurniture on pensation.
Advance
of
may
income100/100-
Winnings
Dividend puzzles, Income Interest of be be
Income wards falure
vided
ceived
Any Any anyshall
asset. mayand
ery in of
10. up x
5. 6. 7. 8. 9. Interest
1. 2. 3. Grossing
writingu/ 80CCA-principal
s ws 80CCBprincipal uws interests
of 56(2).
types
from
Income personsubletting
Agricultural fee/sitting
fee.
Director's
deliv amo other
land. NSS units
Incomes employer.
56(1)
Ws other
than interest.
+amount incomes taxable given.
Net
for from u/s :
vacant or taxable up =
from
2.
Receipts
outside
India. lectures of
from Remuneration Repurchasethose is Interest
gross
Withdrawal bankers,
of
Income articles. Casual56(2).except to
rent
ering than All
9. When Gross
unt.
or by
1. 3. 4. 5. 6. 7. 8.
2/208 Practical Income Tax
PROBLEMS
PROBLEM 1
Mr. Dholds 2,000 of ?100 each in a company. Company had reserves worth
R
50,00,000. preference shares
Out of these it issued bonus shares in the ratio of 1:4. Market value of these
Shares anmounts to 16/- reserves
per share, How will they be treated in the hands of Mr. D ?
SOLUTION
In the present case, bonus shares
have been issued to the preference share holders.
any distibution of bonus shares to preference share bolders to the extent company possesses UIS 2(22) (b)
accumulated
proits whether capitalised or not shall be deemed as dividend. As such market value of 500 shares
ISSued by the company (500 x 16- Der share) ie 58.000 shall be deemed as dividend.
PROBLEM 2
Mr. R heldthe following
investments
(a) ? 90,000 10% (tax free)
:
Debentures of a listed company, (Rate of T.D.S. 10%)
(b) 1,00,000 12% Punjab Govt. Loan.
Commpute his income from interest on securities for the year ending 31-3-2021.
SOLUTION
Computation of Income from Interest on Securities
(a) 90,000 10% (Tax free) Debentures (listed) [9,000 x 10O/90|
(b) ? 1,00,000 12% Punjab Govt.
Loan 10,000
Income from interest on securities 12,000
22,000
PROBLEM 3
Calculate income from other sources from information given below :
(i) Winnings from
(ü) Amount receivedlottery
from race winnings 1,00,000
Gifts Received during the previous 35,000
(i) Received 20,000 as gift from hisyear 2020-21
(ii) Received ? 1,00,000 as gift from hisfriend.
(iii) Received 1,40,000 as gift on his elder brother
(iv) Received 80,000 as gift from his marriage.
NRI
(v) Another gift of ? 18,000 received from hisfriend on 1-1-2021
friend.
SOLUTION
Computation of Income from other sources
Income
) Winnings from lottery
(ii) Amount received from race 1,00,000
winnings = 35,000
To be grossed up [35,000 x 10070]
Gifts received 50,000
(1) Received 20,000 as gift from his friend
(üi) Received ? 1,00,000 as gift from his elder 20,000
(Gifts from relatives are exempted) brother
NIL
Income from Other Sources 2/209

(iii) Received 1,40,000 as gift on his marriage

Gifts on marriage are exempted NIL
(iv) Received 18,000 as gift from his friend 18,000
() Received 80,000 as gift from his NRI fricnd on 1-1-2021 80,000
Taxable gifts 1,18,000
Income from other sources 2,68,000
NOTE : Gifts from friends (Non-rclative) are taxable as the aggregate amount of such gifts excecds 50,000
during the previous year 2020-21).
PROBLEM 4
Compute income from the other sources from the particulars given below :
1. Interest on deposits witha company 10,000
2. University remuneration on working as examiner 6,000
60,000
3. Royalty for writing books
He claims to have spent 20,000 on writing these books
6,000
4. Dividend declared by R. Co. on 1-3-2021l but paid on 1-5-2021 3,000
5 Interim dividend paid on 1-5-2020
6. Stake money on race horses 1.50,000
Horses are maintained by him and expenses on maintenance of these horses are 2,40,000
7. Family pension received 36,000

SOLUTION
Computation of Income from Other Sources
General Incomes u/s 56(1)
10,000
Interest on deposits with Company 6,000
University remuneration
60,000
Royalty for writing books
20,000
Less : Expenses 40,000
36o0o)% I2000 36,000
Family pension 12,000
Less : Standard deduction 33/,% 15000
24,000
80,000
Specific Incomes 56(2)
Dividend
2021-22] 6,000
(a) From R. Co. [Taxable w.e.f. A.Y. Taxable 3,000 9,000
(b) Interim dividend received on 1-5-2020 1,50,000
Stake money on race horses 2,40,000
horses
Less : Expenses on maintenance of race 90,000
Loss to be C/F as it can not be set off NIL
89,000
Income from Other Sources

PROBLEM 5
income from other sources of Mr. Krishna Murthy who held the following ùnvestments
Compute
during the previous year 2020-21 :
(i) 11,000, 10% Central Govt. securities.
(ii) 36,000, 10% Tax-free commercial securities of aclosely held company.
public limited company securities (listed).
(iii) 6,300 received as interest on Tax free
(iv) 7,200 received interest on Karnataka Govt. securities.
2/210
Practical Income Tax
on debentures of Deepak Fertilisers (listed).
(v) 4,000 received as interest
(listed).
(i) ?30,000, 13.5% securities of Paper Mill Co.
(listed).
(i) 35,000, 11% securities of Paper Mill Co. bonds.
(vi) 0,000, 15% Jaipur Municipal Corporation
(ix) Dividend from Carona Lid. 4,000. Karnataka State lottery. The net amount received by
(x) him
Duringwasthe 35,000.
year he Interest prize
also gotona all in
securities is payable on Ist Jan. every year. Bank charged
200 as collection charges for collection of interest.
sOLUTION
Computation of Income from Other Sources
Specific Incomes 56(2)
Dividend from Carona Ltd. [Taxable w.e.f. A.Y. 2021-22] 4,000
Interest on Securities
l1,000 10% Central Govt. Securitics 1,100
R 36,000 10% (Tax free) Commercial
4,000
Securities R 3,600 x 100/90)
R6,300 received as interest on listed securities [6,300 × 100/90] 7,000
? 7,200 received as interest on Karnataka Govt. Securities
(No. TDS) 7,200
{ 4,000 received as interest on listed debentures of
Deepak Fertilisers [No TDS by Co.] 4,000
? 35,000 11% securities of Paper Mill 3,850
7 30,000 13.5% Securities 4,050
?10,000 15% Jaipur Municipal Bonds 1,500
32,700
Winnings from Lotteries
Net Prize 35,000
Gross = [35,000 x 100/70] 50,000
Gross Income
Less : Deduction of Collection charges 86,700
200
Income from Other Sources
86.500
NOTE: No TDS on Interest on debentures by Deepak Fertilizers Ltd. as the amount of interest
does not exceed
?5,000 and other conditions (for exemption fromn TDS) are also fulflled.
PROBLEM 6
Mr. Mukunda furnishes the following information about his income for the
Compute his income under the head "Other previous year 2020-21.
Sources. "
(i) Dividend on equity shares
(üi) Dividend on preference shares 600
(üi) Income from letting on hire of building and machinery 3,200
(iv) Interest on bank deposits under composite lease 17,000
(v) Director's fees 2,500
(vi) Ground rent 1,200
(vi) Income from undisclosed sources (unexplained) 600
(viii) Income from lotteries (Gross) 10,000
The following deductions are claimed by him : 10,000
(a) Collection charges of dividend
(b) Allowable depreciation on building and machinery 20
(c) Fire insurance premium on building and machinery 4,000
100
Income from Other Sources 2/211

SOLUTION
Computation of Income from Other Sources
General Incomes 56(1)
Interest on Bank Deposit 2,500
Director's fees 1,200
Ground Rent 600
Income from undisclosed sources 10,000
14,300
Specific Incomes 56(2)
Dividend
(a) On Equity shares [Taxable w.e.f. A.Y. 2021-22] 600
(6) On Preference shares - [Taxable w.e.f. A.Y. 2021-22] 3,200 3,800
Winnings from Lotteries 10,000
Rent of building and Machinery 17,000
Less: Expenses: Depreciation 4,000
Fire Insurance Premium 100
4,100
12,900
Income from other Sources 41,000

NOTES:1. Income from undisclosed source i.e. unexplained expenditure is taxable at flat rate of 60% without
allowing any expenditure or allowance [Section 115BBE]
2. W.e.f., A.Y. 2021-22, collection charge in respect of dividend income are not allowed as deduction
as per proviso to section 57.

PROBLEM 7
Following are the incomes of Sri Amar for the financial year 2020-21. Compute his taxable
income under the head "Other Sources" if he is Resident, NOR, or Non-resident :
1,000
(a) Interest on Saving Bank deposit Ac with Union Bank, Delhi 40,000
(b) Income from agriculture in Africa invested in Pakistan
(c) Dividends received in USA from an American company part of which 4,000 12,000
remitted to India
India 54,000
(d) Family pension received in Kenya for services rendered in
SOLUTION
Computation of Total Incone
R NOR NR
1,000 1,000 1,000
Interest on Bank deposit-accrued in India
Income from agriculture in Africa -accruing NIL NIL
outside India 40,000
Dividend from American Company accruing
12,000 NIL NIL
outside India
Family pension in Kenya- Services rendered
in India (deemed toaccrue in India) M 5400 39,000
(54,000 Less Std. Deduction 15.0001
39,000 39,000
15oc 92,000 40,000 40,000
Total Income

PROBLEM 8
borrowed 20,000 at 18% p.a. on
Mr. X who maintains books of accounts on mercantile basis
purchased at 100 (due date of
1-9-2020 and invested it in 12% securities of the Central Government
21212
Practical Income Tay
interest lst
14% listed January everyof year). On 1-8-2020, he borrowed ? 30,000 at l5% p.a. for
borrowings debentures investing it onin
C Limited. (Date of payment of interest 15th May every year).
for the period ending 31-3-2021 is however paid by Xon 15-4-2021), HeInterest
Commission
head
to his bank on net amount of interest realised. pays 2%
Compute his income chargeable
income from other sources. under the
[CA. Inter (Adapted)]
SOLUTION
Computation of income of Xfrom other sources(Assessment year 2021-22)
) Interest on 12% securities of the Central Government
(due date of interest lst
January)
(0) Interest on 14% listed debentures 2,400
of C Ltd. acquired on 1-8-2020
due date of interest 15th
May
(No interest shall be due duringevery year.
previous year 2020-21) NIL
Less : Deductions
2,400
) Interest payable on 20,000 for
7months 20,000 x
(ii) Interest
7/12 × 18/100] 2,100
on30,000 for 8 months :
R 30,000 x 8/12 x
15/100]
[This interest is deductible even though no 3,000
has accrued on the debentures of C Ltd. interest
Vide C.I.T.
vs.Rajendra Prasad Moody (1978) (SC)]
(üil) Collection charges (2,400 x 2%) 48

Loss under the head 'Other Sources' 5,148

NOTE : This loss can be set off from any 2,748
other income.
PROBLEM 9
From the following information compute the income
2021-22: from other sources for the assessment year
(i) Card games loss
(iü) From the activity of owning and 12,000
(a) Loss at Bombay maintaining horses for race purposes
(b) Proftit at Bangalore 40,000
(iii) Dividend (Gross) from Indian 20,000
(iv) Betting in horse races Companies 6,000
SOLUTION
oRs 4,000
Computation of Income from Other Sources
(i) Card games loss (cannot be set off or C/F)
(ii) Income for activity of maintaining race horses NIL
Less : Expenses on race horses 20,000
Loss to be C/F 40,000
20,000
NIL
Income from Other Sources 2/213
(ii) Dividend Taxable w.e.f. A.Y. 2021-22 6,000
(iv) Race betting 4,000
Income from other sources 10,000
PROBLEM 10
From the following particulars for the year ended 31st March. 2021, compute the
the head "Income from Other Sources" : income under
Dividends 25,200
Dividends 12,000
Collection charges in respect of Dividends @ 19% of dividend
Rent from letting out of a building alongwith plant and machinery 30,000
Depreciation on buildings 4,000
Insurance on buildings 1,600
Office expenses relating to buildings 1,600
Repairs, rates etc. 1,600
(Nagarjuna B.Com.)
SOLUTION
Computation of Income fromn Other Sources
Specific Incomes 56(2)
Dividend- [Taxable w.e.f. A.y. 2021-22] 25,200
Dividend [Taxable w.e.f. A.y. 2021-22] 12,000
37,200
Less : Bank Commission Not allowed (Note 1) NIL
37,200
Rent of Building and P & M 30,000
Less : Expenses
Depreciation 4,000
1,600pn
Insurance
Office Expenses 1,600
Repairs & Rates 1,600
8,800 21,200
Income from Other Sources 58,400
dividend income are not allowed as deduction.
NOTE: W.e.f. A.Y. 2021-22, collect:on charges in respect of
PROBLEM 11
compute his Gross total income for the
From the particulars of income of Sri. Madan Mohan,
Assessmnent year 2021-22:
(i) He owns an agricultural land in Bangladesh fromwhich he earned an income of 6,500.
for ? 1,200 p.m. for trading purposes.
(iü) He owns a plot of land in Dharwad which is let out
village in India. It is let outfor 900 p.m. and
(iüi) He kas abuilding near agricultural land in a
used for storing agricultural equipments and for supervision of agricultural work.
management consulting fee.
(iv) He received 12,500 during the year as a royaltyof 50 paise per ton of stone raised.
(v) He has a quarry in Ankola. He has let it on spent 450 to earn royalty.
During the year 14,600 tons of stone was raised. He spent 1,000 on the repair of these
3,000 p.m. He
(vi) He has let machinery andfurniture at assets is? 6,000.
assets. Depreciation allowed on these 2,000 p.m. He has sublet 40% of this house at
(vii) He lives in a rented house paying a rent of as municipal tax on the house and spent 500
arent of? 1,500 p.m. He has paid ? 1,000
on the repairs of the whole house. on 1-l1-2020.
(vii) He has received an anount of ? 70,000 as lottery prize
2/214 Practical Income Tax

(e) He borrowed 30,000 on 1-6-2020 from a bank at 15% p.a. interest. He invested the money
in the purchase of equity shares of Public Limited Company. During the year he has not
received any dividend from the company. (Karnataka B.Com.)
SOLUTION
Computation of Inconme from Other Sources
Professional Income
Management consultation fees 12,500
General lncomes 56()
Agricultural Income from outside India 6,500
Rent of Plot 14,400
Royalty from Quarry 7,300
Less : Expenses 450
6,850
Sub-Letting: Rent received 18,000
Less : Expenses
Rent paid 40% of 24,000 9,600
Municipal Taxes 40% of 1,000 400
Repair 40% of 500 200
10,200
7,800
35,550
Specific Incomes 56(2)
Dividend on shares [Taxable w.e.f. A.Y. 2021-22]
but neither declared nor paid by the company during the
P.Y. NIL
Winnings from lottery: amount received R 70,000
Gross amount = [70,000 x 100r70] 1,00,000
Rent of plant and machinery and furniture 36,000
Less : Expenses on repairs 1,000
Depreciation 6,000 7,000 29,000
Income from other sources
Gross Total Income 1,64,550
1,77,050
NOTE : W.e.f. A.Y. 2021-22. Interest on money borrowed for
shall be allowed as deduction from such dividend income upto investing in shares to earn devidend income
20%
|there is no dividend income, so interest on loan shall not be allowedof assuch dividend. However in this question
deduction.
PROBLEM 12
From the following particulars of Mr. Edward for the
compute his total Income for the Assessment year 2021-22. previous year ended 31st March, 2021,
He received :
(i) Director's fee from a company
(ü) Interest on Bank Deposits 10,000
(üi) Income from undisclosed sources 3,000
(iv) Winnings from lotteries (unexplained money) 12,000
(v) Royalty on a book written by him 24,500
(vi) By giving lectures in functions 8,000
(vii) Interest on loan given to a relative 5,000
(viii) Interest on tax free debentures of a company 7,000
(listed in recognised stock exchange) s 3,600
 Income from Other Sources 2/215

(ix) Dividend on shares 6,300

(x) Interest on post office savings bank Alc 500
(xi) Interest on Government Securities 2,200
He paid i00forcollection of dividend and 1,000for typing the manuscript of book writen by
him.
SOLUTION
Computation of Income from Other Sources
General Incomes u/s 56(1)
Director's fees 19,000
Interest on Bank Deposits 3,000
Income from undisclosed sources 12,000
Royalty on Books [8,000- 1000] 7,000
Remuneration for delivering lectures 5,000
Interest on loan given to relatives 7,000
44,000
Specific Incomes 56(2)
DividendTaxable 7,000
Net amount received = 6,300
Rate of TDS = 10%

6300
.. Gross amount = x 100 =7000
90
Interest on securities
(a) Interest on tax free listed securities
? 3,600 [gross = 3,600 x 10090] 4,000
6,200
(b) Interest on Govt. securities 2,200
Winnings from lotteries: Net 24,500
Gross amount = 24.500 >x 100/70 35,009 48,200
Gross Income from other sources
92,200
Not allowed NIL
Less : Deduction for Bank Commission on Dividend -
92,200
Income from other sources
upto 3,500.
NOTES: 1. Interest on Post Office Saving Bank account is exempted
covered ws 69A. It is taxable at a flat rate of 60%
2. Unexplained money found is a deemed income
u/s 115BBE without allowing any deduction
company or from matual fundis taxable in the
3. W.e.f. A.y. 2021-22, dividend rom an Indian
hands of shareholders.

PROBLEM 13
During the previous year 2020-21 he had
Hari Gopal is a member of Parliamentfrom Bangalore.
the following incomes :
of 2,500 p.m. and daily allowance of
(i) As a member of Parliament he received a salary
15,100for attending the various sessions.
(ii) He held the following investments :
(a) 10% preference shares in Mysugar Works Ltd. of the face value of ? 5,000.
Finlay Ltd. The company declared interim
(b) 1,000 equity shares of ? 10each in Tata
2/216
Practlcal Income Tax
dend of I5% on 1sih Feb.2020 but paid on Ist June 2020 and afinal dividend of 10%
on 30-3-2021.
(C) A T0% fixed deposit of J0.000 is beld by hin in Indian Banks. Interest is credited
annually.
(d) He received dividend of 500 from a
(iü) He won 8,000 in Co-operative Society.
crossworda puzles.
() On l-9-2020 he purchased plot of land for constructing his house, On
f funds he could not get the house constructed and hence let out the plotaccount
at
of shortage
1-11-2020. 150 p.m. from
(") He has let machinery and furniture and also building to Mr. Krishna at a
S,000. He spent 1,500 on the repair of machinery, furniture and building monthly rent of
during the
previous year. Depreciation allowed on these assets for the previous year was ? 10,000.
Compute income of Sri HariGopal under the head "Income from Other Sources".
(Mysore B.Com.)
SOLUTION
Computation of Income from Other Sources of Sri Hari Gopal
A. General Incomes ws 56(1)
() Salary as M.P.
() Daily Allowance (Exempted uls 30,000
(iii) Interest on Bank Deposits (10,00010(17)]
x
NIL
(iv) Ground rent for 5 months (150 x 5) 10/100) 1,000
750
B. Specific Incomes ws 56(2) 31,750
()) Dividend from Indian Companies :
Preference shares (taxable)
Equity shares (Interim &final): Taxable (1500 500
(ii) Dividend from Co-op. Society + 1000) 2500

(iüi) Crossword Puzzles 3,500

(iv) Rent from Machinery & Furniture

Less : (Expenses on dep. and repairs) 60,000
(10,000 + 1,500)
11,500
Taxable Income from other Sources 48,500
91,750
NOTES:1. No tax is deducted at source in case of co-operative
2.W.e.f. A.Y. dividend.
2021-22, dividend from Indian company or matual funds is
taxable.
PROBLEM 14
Shri Swami Prasad furnishes the following
on 31st March, 2021 : particulars of his income for the previous year ending
(i) Dividend from atea company in June,
2020 2,500 (60% of the income of the
agricultural income). company s
(ii) Amount won on Ist November, 2020 from a
horse race 6,500.
(ii) Interim Dividend declared by the
Directors of K. Co. Ltd. in January, 2021 but the payment
was received in June, 2021 for which dividend
amount received as dividends was &.000.
warrants were despatched in May, 2021. The
 -21-32|
Income from Other Sources
21217
(iv) Dividend declared by P. Co. Ltd., in
April, 2021 and the payment was January, 2021, dividend warrants were despatched in
(v) Amount received in received in June. 2021
amounting to 4000
February, 2021
(vi) Interest (gross) on deposit with afirm ?
in connection with
winning from alottery ? 35,000.
(vii)) Dividend received from a 5,600.
(viii) Income from non-agriculturalCo-operative Society, 450.
land 1.500.
Shri Swami Prasad claims the following
Bank commission 100 for collecting expenses:interest and 500 on winnings from horse race ana
winnings from lotteries; lnterest on loan taken to purchase shares in tea company ? 800; and expenses
incurred for purchasing lottery tickets 2, 000.
Compute the taxable income of Sh. Swami Prasad under the head 'Income from
Other Sources.
(B.Com, Panjab)
SOLUTION
Computation of Income fronm Other Sources
General Incomes 56(1)
Interest on deposits with firm 5,600
Income from non agricultural land
(1.500 7,100
Specific Incomes 56(2)
Dividend
(a) Tea Company [Taxable] 2,500
(6) Interim Dividend not received during the P.Y. 2020-21 NIL
(c) Declared Dividend from P.Co. [Taxable in the P.Y. in which
it is declared] 4,000
(a) Coop. dividend 450
6,950
Casual Incomes
Race winnings 6.590
Winnings from Lottery ? 35,000 (Net)
Gross = [35,000 x 100/70] 50,000 56,500
Gross Income 70,550
Less : Deductions
Collection charges for interest 100
Interest on Loan - allowed (upto a maximum of 20% of 800
dividend income in respect of dividend income ) NIL
Collection charges for lottery
-Not allowed
Purchase of lottery tickets NIL
Not allowed 900
69,650
Income from Other Sources

PROBLEM 15
:
An assessee had the following investments as on Ist April, 2020
(i) 40,000, 12% Central Govt. Loan,;
(iü) 30,000, 10% Govt. Securities;
 Practical Income Tax
2/218
Preference shares of paper mill company;
(m) 20,000, 9% Bombay Port Trust Bonds;
(i) ? 50,000, 10% Debentures of alimited company (unlisted);
(") 20,000, 11% securities issued by Govt. of England;
(vi) 10,000, 10% NationalPlan Certificates;
(vii) 10,000, 10% 10-year debentures; 1,13O
(vii) ? 20,000, 14% Municipal
NSC VII issue purchased on 11-03-2020
on
(it) Interest accrued(Tax-free) (unlisted).
Debentures ofa limited company
(*) 18,000, 10% 50.000,. 12% Maharashtra Govt. Bonds for 60.000
bought from
On Ist September, 2020 he301h June and 31st December. For this purpose he took a loan
interest on which is payable on p.a. and the Balance of ? 20,000 were financed out of aprevioue
his Bankers for 40,.000 @15%
loan taken for purchase of a motor car @9% p.a. as collection charges and 3% commission on purchase
Bank charged 2% of interest and dividend
of securities.
Calculate the income from other sources. (Adapted CalcuttaUniv. B.Com. (Hons.)l
sOLUTION
Computation of Income from Other Sources
Interest on securities :
40,000, 12% Central Govt. Loan 4,800
30,000, 10% Govt. Securities 3,000
5,500
50,000, 11% Bombay Port Trust Bonds
20,000, 15% Debentures of a Company (Unlisted) 3,000
20,000, 14% Municipal Debentures 2,800
18,000, 10% Tax-free debentures of a Company (unlisted)
[Net 1,800; Grossed up = [1,800 x 100/90] 2,000
50,000, 12% Maharashtra Govt. Bonds (Half yearly) 3,000
Interest accrued on NSC VIII issue 1,130
25,230
Dividend
20,000, 9% Preference Shares of Paper mill (Taxable w.e.f. A.Y. 2021-22] 1,800
Interest
10,000, 10% Securities issued by a Foreign Govt. 1,000
Total 28,030
Less : Deductions
Collection Charges in respect of interest income @2% of
(28,030 - 1,130 1800] 502
Interest on Borrowed Money
(40,000 x 15/100 x 7/12) 3,500
4,002
Income from other Sources
24,028
NOTES : (a) Commission on purchase of securities shall not be allowed as deduction as it is capital
(b) Interest on money borrowed for some other purpose shall not be expenditure.
interest on securities.
allowed as deduction out of
(c) No collection charges on accrued interest ofN.S.C. VIIl issue
and on dividend from shares.
PROBLEM 16
Mr. Shivanand has following investment in the previous year
(i) 11,000, 10% Karnataka State Govt. Loan.
ended 31st March, 2021 :
(ii) 30,000, 13.5% Debentures of Tata Machine Tools Lud. (Listed).
Income from Other Sources 2/219
(i) 7 35,000, 11% Securities of Sugar MillCompany (not Listed).
(iv) 36,000, 10% Tax-free Commercial Securities (unlisted).
(v) 3,580 received as interest on Tamil Nadu Govt. Securities
(unlisted),
(vi) 4,500 received as interest on the Securities ofa Paper MillCompany (not listed).
(vii) 4,S00 received as interest on debentures of Textile Company (listed).
During the previous year 2020-21 he purchased ? 50,000. 7% capital investment Bonds on Ist
October, 2020. For this purpose he borrowed 30,000 from Bank at 15% p.a. Interest on all
Securities is payable on 30th June and 3lst December. The bank charged 1.5% commission on net
realisation of interest as collection charges.
He was also a Director in acompany from which he received 3,000 as directors fees. His other
incomes are:
() Winning fromLottery 25,000
(à) Income from Agriculture in Sri Lanka 10,000
(ii) Winnings from Horse race 15,000
(iv) Interest on Post Office Savings Bank Account 2,000.
Find out his taxable income from other Sources for the Assessment Year 2021-22.
(Bangalore University, B.Com.)
SOLUTION
Computation of Income from Other Sources

General Incomes u/s 56(1)

Director's fee 3,000
Income from Agriculture in Sri Lanka 10,000
Interest on P.0. Saving Bank A/c (Exempted upto 3,500) Exempted
13,000
Specific Incomes u/s 56(2)
Winnings from horse race 15,000
Winnings from Lottery 25,000
40,000
Interest on Securities Rate TDS Gross
? 11,000 10% Karnataka Govt. Loan NIL NIL 1,100
30,000 13.5% Listed Debentures of Tata Machine NIL NIL 4,050
Tools Ltd.
? 35,000 11% Sugar Mill Debentures 10% 385 3,850
Received 3,580 as int. on Govt. Securities NIL NIL 3,580
Received 4.500 as interest on unlisted
securities [4,500 x100/90] 10% 500 5,000
Received 4,500 as interest on listed
securities NIL NIL 4,500
7 50,000 7% Capital Investment Bonds NIL NIL Exempted
36,000 10% (Tax free) unlisted securities
[3,600 x 100/90] 10% 400 4,000
Gross interest 1,285 26,080
Less : Deductions
372 25,708
1. Collection charges 1.5% of [26,080 - 1,285 = 24,795]
Income from other sources 78,708
 2/220
Practical Income Tax
NOTE : (i) No deduction of interest on loan for purchase of capital Investment Bonds as
exempted. their interest is
(ii) No TDS on interest on debentures by Tata Machine Tools Ltd. and by Textile
amount of interest does not exceed 5.000 on the assumption that companies are (a)Company as
widely helthed
companices, (b) pay interest by account payee cheque (c) Mr. Shivanand is a resident of
India
PROBLEM 17
Karthik a resident individual, submits the following particulars of his income for the
ending March, 31, 2021 : previous ve
Dividend from Golden Finance Lud. 7 5,600 declared on 15-5-2020. Dividend
Mills Lid.R3,200. Interest paid on capital borrowed for the from Laksh:
of Golden Finance Ld. ?6,200. Collection charges in respect ofpurpose of investment in sharet
(b) Rent from letting abuilding alongwith plant
dividend 125.
and machinery (rent of building cannot be
separated from rent of plant &machinery) 31,200. Collection charges in respect of rent
? 400. Fire insurance premium in
respect of building ? 550, Repairs in respect of building
4,800. Fire insurance premium in respect of plant and
Building, Plant and Machinery? 18,600. machinery ? 750. Depreciation of
(c) Received as winnings from card games
Tax deducted at source 30% (on both 14,000. and from lottery: Net amount ? 1,40,000:
the
(d) Interest on securities issued by the incomnes).
income chargeable under the head "Income Government of Sikkim 20,000. Determine the
from Other Sources" for the
2021-22. assessment year
SOLUTION
Computation of Income from Other Sources
Specific Incomes w/s 56(1)
Dividend from golden finance -Taxable
Less Interest on loan 6200 or 20% of
: 5,600
Collection charges Not allowed 5600, W.E.L 1,120
Rent from Building and Plant and NIL 1,120 4,480
Less : Expenses machinery, 31,200
Collection charges
Fire Insurance Premium (Building) 400
Repairs 550
Fire Insurance Premium (P & M) 4,800
750
Depreciation 18,600
Winnings from card games 25,100
[(14,000 >x 100/70)])
Winnings from Lottery 20,000
[1,40,000 x 100/70)
Interest on securities of Sikkim Govt, 2,00,000 2,20,000
Dividend from Lakshmi Mills Ltd. 20,000
Income from Other Sources 3,200
2,53,780
INOTE : Collection charges in respect of
dividend are not allowed as deduction.
 Income from Other Sources 2/221
PROBLEM 18
Mr. Subramaniam furnished the following particulars of his investment for the
ended 31-3-2021. previous year
(a' (i) 30,000 units of UTI (Dividend declared 4,000)
(iü) 40,000 in Post Office S.B. Alc at 5% interest p.a.
(iüi) 90,000 Fixed Deposit in Syndicate Bank at |1% interest D.a. made on 1-11-2019.
Amount of interest credited to his account.
(iv) 40,000 deposit in Panjab Finance Corporation at 13%
(v) 25,000, 10% debentures of Pfizer Ltd. (Listed) (Interest interest p.a.
is paid in A/c payee cheque)
w(vi) 30,000, 10% Haryana Electricity Board Bonds.
(vii) 4, 500 Interest received on National Development Bonds.
(b) On l-I1-2020 he purchased 45,000, 7% Capital Investment Bonds for which he borrowed
7 30,000 @ 15% interest.
tc) On 25-4-2020 he inherited 45,000, 10% Debentures of Biba Limited (unlisted) from
his uncle.
(d) The interest on all these securities is payable on 31st December every year. The bank
charged 1% commission on collection of net amount of interest and dividend.
From the above compute kis income from Other Sources and bank does not charge any commission
on collection of interest on deposits with same bank.
SOLUTION
Computation of Income from Other Sources
Income Rate TDS
(a) () Dividend on units of UTITaxable 04.000 NIL NIL
(No TDS if the amnount of dividend does not exceed ? 5,000)
NIL NIL NIL
(ii) Interest on P.O.S.B. Alc Exempted u/s 10 (15)
5,200 NIL NIL
(üi) Interest on deposit with Panjab Finance Corporation 2,500 NIL NIL
(iv) 25,000 10% debentures of Pizer Ltd.
30,000 10% Haryana State Electricity Bonds 3,000 10%300
(vi) NIL
(vi) Interest on National Development Bonds 4,500 NIL
45,000 7% Capital Investment Bonds-Exempted NIL NIL NIL
(b) 10% 450
(c) 45,000 10% Biba Debenture (Unlisted) 4,500
23,700 750
Gross Income
Deductions
1. Bank Commission on interest 1% of
(23,700 4,000 -750] 190
2. Interest on Loan to purchase Capital Investment
Bonds Not Allowed as interest is exempted NIL 1900
23,510
Add: Income from Bank Deposit 9,900
Income from other sources 33,410
as there will be no
NOTES:1. In case of ínterest on bank deposit, tax shall be deducted at source @ 10% but
collection charges, hence it has been treated separately.
shall be
2. Interest on Post Office Saving Bank alc is exempted upto 3,500 and excess, if any
eligible for deduction upto 10,000 u/s 80TTA.
allowed. u/s 57 is on
3. W.e.f. A.Y. 2021-22. In respect of dividend income, the only deduction of 20% of such
account of interest on lo¡n paid for earning such dividend income upto a maximum
dividend income. Hence, collection charges in respect of dividend are not allowed.
2/222

Test Your Knowledge Practica \ncome Tay

Q. 1. Dr. Bijli is a Professor of Economics. He submits before you the
compute the income under the head 'Income from other sources' for the fasseosl mowientng year
() Heis the author of a book which fetched him a gross royalty of ? 15.000 information to
Heclaims the following deductions from the amount of royalty :
(a) Salary to aclerk who collects for him necessary data andI goes
2021 -2 .
readings 2,400. through final
the
(b) Purchased books worth 400 in connection with the
revision of the
(c) Telephone expenses ofr 800 attributed to the publication andI sale ofbook.
pro f
his
matters in connection with the printing of the new edition of the book
(i) Income from articles which were published in 'Economic Times' and
book and other
73,000.
(i) He lives in a rented house paying a rent of ? 300 p.m. The house is
Eastern Economist
Hence he has sub-let one third portion of the house on a rent of ? too big. for his
150 p.m. Dr.
undertaken the liability of paying municipal taxes of ? 540 on the whole family.
current repairs of the whole house amounting to 600. house andBialsojli has
(iv) He received 50 per lecture delivered at the Christian Institute. fhe
he delivered 24 lectures. During previous year
the
(v) He is an examiner of a number of universities. This source gave
him a
2,000.
His other incomes were: remunerationn of ?
(a) Winning from card games and betting 6,500.
(b) Winning from chess 1,000.
(c) Received interest on Govt. of England bonds ? 500.
ANSWER (Mysore B.Com.)
Calculation of Income from Other Sources of Dr. Bijli
Income from other sources
I. General incomes ws 56 (1)
(a) Royalty 15,000
Less : Expenses : Salary 2,400
Books 400
Telephone 800
3,600 11,400
(b) Income from writing of articles
(c) Sub-letting: Rent Received C1so XD 3,000
1,800
Less :Expenses -Rent paid 1,200
M.Taxes 180
Repairs 200 1,580 220
(d) Remuneration from other universities 2,000
(e) Remuneration for delivering lectures
() Interest on Bonds by Bank of England 5A
18,320
II Specific Incomes u/s 56(2)
(a) Winning from cardgames 6.500
(b) Winning from chess 7,500
1,000
Income from other sources 25,820
 Income from Other Sources 2/223
0. 2. Mr. Rama Rao furnishes the following particulars of his
income :
1. Dividend from U.T.Ion unit 1964 scheme 17,000
2. Dividends (gross) from Tea Company 60% of the income of
agricultural income company is 3,000
3. Interim dividend@ 10% on shareholding 15,000 in a Textile Mill.
Itwas declared and paid on 25-2-2021. 1,500
4. Dividend from a foreign company in Germany. Tar deducted at source has
not been paid by the company to the Govt. of India 4,000
5. Interest on Term Deposits with Bank (Net) 10,800
6. Director's fees 2,000
7. Income from letting out of machinery, plant etc. afier cessation of Business 30,000
8. Royalties from mining 10,000
9. Monthly Rent received by Sub-letting a house. 1,000
[The house was got on rent @ 200 p.m. in the year 1998. Expenses
incurred on house Repairs 3,000 &others 1,000]
10. Winnings from lotteries. 25,000
He claims the following expenses:
(i) Collection charges for U. T.I., dividend 300
(ü) Interest on money borrowed to purchase shares of Textile Mill 1,000
(ii) Depreciation and other expenses in respect of Plant &Machinery 5,000
Compute Mr. Rao income under the head 'Income from Other Sources'.
ANSWER
Computation of Income from Other Sources' of Mr. Rama Rao.
L General Incomes u/s 56(1)
Interest on Bank deposits
[10,800 x 100/90] 12,000
Director's fees 2,000
Mining royalties 10,000
Sub-leting of House
Rent Received 12,000
Less: Rent paid 2,400
Repairs 3,000
Others 1,000 6,400
5,600
29,600
II. Specific Incomes u/s 56 (2)
Dividend from U.T.I. [Taxable w.e.f. A.Y. 2021-22] 17,000
Dividend (Gross) [Taxable w.e.f. A.Y. 2021-22] 3,000
Dividend from foreign Company 4,000
Interim Dividend [Taxable w.e.f. A.Y. 2021-22] s 1.500
21,500
Less: Collection Charges Not allowed NIL
Interest on Loan Allowed (1000 or 20%
of 1500 w.e.l. i.e. 300) 300 300 21,200
Rent of Plant and Machinery 30,000
Less : Depreciation and Expenses. 5,000 25,000
Winning from Lotteries 25,000
Income from Other Sources 1,00,800
 Practical Income Tax
2/22
income for the assessment year
Q 3. Shri Nitin Bose furnishes the following particulars of his
2021-22.
He had the following Investments as on 1-4-2020
7 50,000 5% Central Govt. Loan
40,000 6% Govt. Securities.
? 20,000 8% Preference shares of a Paper Mill. deemed to be agricultural
20,000 Equity shares of a Tea Company whose 60% income is
income. Dividend received on 1-5-2020 is 4,000.
60,000, 15% Debentures of aLimited Company (unlisted).
10.000, 10% Securities issued by Govt. of Nepal.
1-11-2019).
e 50,000 National Saving Certificates (VIIl issue acquired on
Interest accrued for financial year 4,520.
18,000 10% (Tax-Free) Debentures of alimited company (unlisted). 450
?5,000, Debentures of aCooperative Society. Interest received during the year
? 1,40,000 Fixed Deposit in SBI for five years. The interest accrued for the year ? 14.000
T.D.S. @ 10%.
On lst September 2020 he bought 50,000; 10% Punjab Govt. Loan interest on which is
payable on 31st December. For this purpose he took a loan from his bankers for ? 40,000 at 10%
p.a. and 20,000 were financed out of apersonal loan taken for the purchase of motor car @10%
p.a.
Bank collection charges on interest amounted to 800 and a commission of ? 1,800 was paid on
purchase of securities.
Compute his income from other sources for the Assessment Year 2021-22.
ANSWER
1. Computation of Total Income
() 50,000 5% Central Govt. Loan 2,500
(i) 40,000 6% Govt. Securities 2,400
(ii) 60,000 15% Debentures of a Co. 9.000
(iv) 50,000 National Savings Certificates (VIl issue) 4,520oe
(v) 18,000, 10% (Tax-free) Debentures of a(unlisted)
Company (1,800 x 100/90) 2,000
(v) 50,000 10% Pb. Govt. Loan 5,000
Gross Interest 25,420
Less: Expenses
(a) Collection Charges 800
(b) Interest on loan (40,000 x 10/100 x 7/12) 2,333 3,133
22,287
2. Dividend
20,000 8% Preference shares Taxable 1600o e t b
()
() Equity shares Taxable 3,580 5,180
3. Interest
() Interest on ? 10,000 10% Nepal Govt. Bonds 1,000
(ii) Debentures of Coop. Society 450
(iü) Interest on SBI fixed Deposit 14000 15,450
Income from other sources 42,917
NOTE: Commission on sale and purchase is not allowed to be deducted.
Income from Other Sources 2/225

Q.4. 7he followingassessees are employed in business and hold certain securities as investm nt.
You are required to compute the amount of interest which will be taxed under the head. 'Income from
other sources'.
(a) A received 9,000 as interest in respect of Govt. Securities.
(b) R held 20,000 6% Karnataka Govt. Securities during the financial year 2020-21.
(c) B received 10,000 as interest on securities which are mentioned in section 10 (15).
(d) C held 20,000 14% debentures in J.K. Synthetics Ltd. which are listed on the Calcutta
stock Exchange.
(e) D received 9,000 as interest on securities which are not listed on any stock exchange.
ANSWER
Computation of Taxable Interest in each case seperately
(a) Interest received in respect of Govt. Securities shall be fully taxable. It will not be grossed
up as there is no TDS.
(b) Taxable Interest shall be 1,200 only.
(c) Interest received on securities notified u/s 10(15) is fully exempted.
(a) Interest of 2,800 will be fully taxable in the hands of Mr. C.
(e) Interest received by Mr. D =9,000
Tax deducted at source (unlisted) 10%
Gross interest =9,000x 100/90]= 10,000.