Advance Learning on Income from other sources (Practical)€¦ · Advance Learning on Income from...
Transcript of Advance Learning on Income from other sources (Practical)€¦ · Advance Learning on Income from...
Advance Learning on Income from other sources (Practical)
Incomes which are charged to tax under the head “Income from other sources”
Illustration 1
Mr. Kapoor is a trader in shares. He held several shares as stock-in-trade. During the year
2012-13, he received Rs. 84,252 as dividend on shares held by him as stock-in-trade. He
wants to treat the dividend income of Rs. 84,252 as business income. However, his
accountant advised him that dividend income is always taxed as income from other sources.
Mr. Kapoor is confused in this regard, hence, he wants to know the provisions of taxability of
any income under the head of income from other sources. Advise him in this regard.
Solution
“Income from other sources” is the last and residual head of income. Hence, any income
which is not specifically taxed under any other head of income will be taxed under this head.
Further, there are certain incomes which are always taxed under this head. These incomes are
as follows:
As per section 56(2)(i), dividends from domestic company are always taxed under this
head; however, dividends other than those covered by section 2(22)(e) are exempt from
tax under section 10(34).
Winnings from lotteries, crossword puzzles, races including horse races, card game and
other game of any sort, gambling or betting of any form whatsoever, are always taxed
under this head.
With effect from the assessment year 2010-11, income by way of interest received on
compensation or on enhanced compensation shall be chargeable to tax under the head
“Income from other sources”, and such income shall be deemed to be the income of the
year in which it is received, irrespective of the method of accounting followed by the
assessee. Further, such interest income shall be charged to tax under the head “Income
from other sources”; however, deduction of a sum equal to 50% of such income shall be
allowed from such income (apart from this, no other deduction shall be allowed from such
an income).
Gifts are also taxed under this head.
In addition to above, following incomes are charged to tax under this head, if not taxed
under the head “Profits and gains of business or profession”.
(a) Any contribution to a fund for welfare of employees received by the employer [Section
56(2)(ic)].
(b) Income by way of interest on securities [Section 56(2)(id)].
(c) Income from letting out or hiring of plant, machinery or furniture [Section 56(2)(ii)].
(d) Income from letting out of plant, machinery or furniture along with building and both
the lettings are inseparable [Section 56(2)(iii)].
(e) Any sum received under a Keyman Insurance Policy including bonus [Section
56(2)(iv)].
Income chargeable to tax under the head “Income from other sources” is to be computed in
accordance with the method of accounting regularly employed by the assessee. However,
method of accounting does not affect basis of charge in case of dividend income.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Considering above provisions, dividend of Rs. 84,252 will be taxed under the head “Income
from other sources”. However, by virtue of section 10(34) dividend income is exempt from
tax and, hence, the entire dividend income of Rs. 84,252 will not be liable to tax.
Illustration 2
During the previous year 2012-13, Mr. Soham wins Rs. 2,52,000 (net of deduction of
tax at source) from card games. Advise him regarding the taxability of winnings from
card game of Rs. 2,52,000.
**
Under sections 194B and 194BB, tax is deductible @ 30% on payment made in
respect of winnings from lotteries or crossword puzzles or card games or other games
if the payment exceeds Rs. 10,000. In case of winnings from horse races, payments
exceeding Rs. 5,000 are subject to deduction of tax at source at the rate of 30%. If net
amount received is given, then the net amount shall be grossed up to find out the
amount chargeable to tax. The mode of conversion is as follows:
Net amount
1-rate of tax
100
i.e.
Net amount
(1- 0.3)
Considering the above discussed provisions, Rs. 3,60,000 [i.e., Rs. 2,52,000/ (1-
0.30)] will be charged to tax under the head “Income from other sources”.
Relevance of method of accounting
Illustration 3
Ascertain the head of taxability of the incomes given below:
Dividend of Rs. 1,84,000 received by Mr. Raja from an Indian company.
Lease rent of vacant plot of land of Rs. 52,200 received by Mr. Kumar.
Rs. 8,400 won by Mr. Shan from a crossword puzzle.
Rs. 2,52,000 received by Mr. Kumar from his friends on his wedding
anniversary.
Rent of building let out along with certain amenities of Rs. 1,52,000 (Rs.
1,00,000 pertain to rent of building and Rs. 52,000 towards other amenities)
received by Mr. Subham.
Compensation amounting to Rs. 1,25,252 received by Mr. Sohil from the
Government for compulsory acquisition of Industrial land.
Interest of Rs. 8,252 received by Mr. Sahil on a bank deposit.
**
(As amended by Finance Act, 2013)source : www.trpscheme.com
Nature of income Head of taxability
Dividend of Rs. 1,84,000 received
by Mr. Raja from an Indian
company.
Dividend is always charged to tax under
the head “Income from other sources”.
However, dividends from domestic
company except dividends covered by
section 2(22)(e) are exempt from tax
under section 10(34).
Lease rent of vacant plot of land of
Rs. 52,200 received by Mr. Kumar.
Lease rent from vacant land is always
charged to tax under the head “Income
from other sources”.
Rs. 8,400 won by Mr. Shan from a
crossword puzzle.
Income by way of winnings from
lotteries, crossword puzzles, races
including horse races, card games and
other game of any sort, gambling or
betting of any form whatsoever, are
always charged to tax under the head
“Income from other sources”. Hence, Rs.
8,400 won from a crossword puzzle will
be charged to tax under the head “Income
from other sources”.
Rs. 2,52,000 received by Mr.
Kumar from his friends on his
wedding anniversary.
Gifts received by an individual or HUF
(which are charged to tax) are taxed under
the head “Income from other sources”. In
this case, gift is received from friends and
it exceeds Rs. 50,000. Hence, entire
amount will be charged to tax under the
head “Income from other sources”.
Rent of building let out along with
certain amenities of Rs. 1,52,000
(Rs. 1,00,000 pertain to rent of
building and Rs. 52,000 towards
other amenities) received by Mr.
Subham.
Rent of building will be charged to tax
under the head “Income from house
property” and rent of amenities will be
charged to tax under the head “Income
from other sources”. This rule is
applicable even if the assessee receives a
composite rent. Hence, rent of building of
Rs. 1,00,000 is not charged to tax under
the head “Income from other sources”.
Compensation amounting to Rs.
1,25,252 received by Mr. Sohil
from the Government for
compulsory acquisition of Industrial
land.
Income received in respect of
compensation or enhanced compensation
for compulsory acquisition of property is
not charged to tax under the head
“Income from other sources”. Only
interest amount received on compensation
or enhanced compensation is charged to
tax under the head “Income from other
(As amended by Finance Act, 2013)source : www.trpscheme.com
sources”. Hence, nothing will be taxable
under the „Income from other Sources‟ on
Rs. 1,25,252 received by Mr. Sohil.
Interest of Rs. 8,252 received by
Mr. Sahil on a bank deposit.
Interest on bank deposits is charged to tax
under the head “Income from other
sources”.
Sum of money received without consideration (commonly known as monetary
gift) by an individual
Illustration 4
During the year 2012-13, Mr. Raja received a gift of Rs. 2,84,848 from his father. Apart from
gift of Rs. 2,84,848, he received gift of Rs. 1,25,252 from his friends residing abroad and gift
of Rs. 25,000 from friends of his spouse on his wedding anniversary. To understand the
taxability of the gifts, he approaches you. Advise him in this regard.
Solution
Any sum of money (i.e., generally known as gift) received by an individual/HUF without
adequate consideration is charged to tax, if the following conditions are satisfied:
(i) The sum of money is received by an individual or HUF on or after 1-10-2009.
(ii) Such sum of money is received without consideration.
(iii) The aggregate value of such sum received during aforesaid period exceeds Rs. 50,000.
Nothing contained in the aforesaid provisions will apply to the following cases:
Money received from relatives (see note 1 below).
Money received by a HUF from its members.
Money received on occasion of the marriage of the individual.
Money received under Will/ by way of inheritance.
Money received in contemplation of death of the payer or donor.
Money received from a local authority.
Money received from any fund, foundation, university, other educational institution,
hospital or other medical institution, any trust or institution referred to in section 10(23C).
Money received from a trust or institution registered under section 12AA.
Note 1: Relative for this purpose means:
(a) Spouse of the
individual;
(b) Brother or sister of
the individual;
(c) Brother or sister of the
spouse of the individual;
(d) Brother or sister of
either of the parents of the
individual;
(e) Any lineal ascendant or
descendent of the individual;
(f) Any lineal ascendant or
descendent of the spouse of
the individual;
(g) Spouse of the person
referred to in (b) to (f)
Considering the above provisions, the tax treatment of gifts in the hands of Mr. Raja will be
as follows:
(As amended by Finance Act, 2013)source : www.trpscheme.com
Gift received from father will not be taxed, since father falls under the definition of a
relative. Hence, nothing will be charged to tax in respect of gift of Rs. 2,84,848 received
from father.
Gift received from any person other than relative and otherwise than on prescribed
occasions is fully taxed. Hence, gift of Rs. 1,25,252 received from friends of Mr. Raja
residing abroad and gift of Rs. 25,000 received from friends of spouse of Mr. Raja on the
occasion of his wedding anniversary will be fully taxed.
Illustration 5
During the year 2012-13, Mr. Kapoor received following gifts from his friends on the
occasion of the marriage of his daughter.
Rs. 38,200 on 5-7-2012
Rs. 8,400 on 23-3-2013
What will be the tax treatment of above gifts?
Solution
Sum of money received without adequate consideration (i.e., a gift) from any person other
than relatives (see previous illustration for meaning of relative) and otherwise than on
prescribed occasions is charged to tax, if the aggregate amount of such gifts exceeds Rs.
50,000.
In this case the gift is received from person other than relatives and otherwise than on
prescribed occasions. Hence, entire amount of gift will be charged to tax, if the aggregate
amount of gift exceeds Rs. 50,000.
The aggregate amount of gift comes to Rs. 46,600 which is below Rs. 50,000. Hence, nothing
will be charged to tax in the hands of Mr. Kapoor.
Suppose in the above case the amount of second gift is Rs. 18,400 instead of Rs. 8,400, then
the aggregate amount of gift will come to Rs. 56,600. In this case entire amount of Rs. 56,600
will be charged to tax in the hands of Mr. Kapoor.
Immovable property received without consideration/adequate consideration by
an individual
Illustration 6
On 1-8-2012, Mr. Soham gifted a plot of land to his friend, Mr. Sumit. The market value of
such plot was Rs. 25,84,252 and the value of the plot adopted by the Stamp Valuation
Authority for charging stamp duty was Rs. 30,25,000. On 23-3-2013, Mr. Sumit purchased a
residential building (building P) from one of his friends. The building was purchased for Rs.
52,25,252, however, the value of the building adopted by the Stamp Valuation Authority for
charging stamp duty was Rs. 60,00,000. Advise Mr. Sumit regarding the tax treatment of
above items.
Solution
Any immovable property received without consideration (i.e., received by way of a gift) by
an individual/HUF is charged to tax, if the following conditions are satisfied:
(i) Any immovable property is received by an individual or HUF on or after 1-10-2009.
(ii) Such property is received without consideration.
(iii) The stamp duty value of such property exceeds Rs. 50,000.
In above case, the stamp duty value of the property adopted by the Stamp Valuation
Authority for charging stamp duty will be treated as income of the receiver.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Nothing contained in aforesaid provisions will apply to the following cases:
Property received from relatives (see illustration 4 for meaning of a relative).
Property received by a HUF from its members.
Property received on occasion of the marriage of the individual.
Property received under Will/ by way of inheritance.
Property received in contemplation of death of the payer or donor.
Property received from a local authority.
Property received from any fund, foundation, university, other educational institution,
hospital or other medical institution, any trust or institution referred to in section 10(23C).
Considering above provisions, full stamp duty value in respect of plot of land of Rs.
30,25,000 will be charged to tax in the hands of Mr. Sumit. However, nothing will be taxed in
respect of building P since if any immovable property is acquired prior to 1-4-2013 for a
consideration which is less than stamp duty value then nothing will be taxable in the hands of
recipient, even though the difference between stamp duty and consideration paid/payable
exceeds Rs. 50,000.
Had the building been acquired on or after 1-4-2013 instead of on 23-3-2013, entire
difference of Rs. 7,74,798 (being greater than Rs. 50,000) would have been changed to tax.
Specified movable property received without consideration (commonly known as
non-monetary gift) by an individual
Illustration 7
During the year 2012-13, Miss Khushi received following gifts from his relatives/friends:
Painting received from her friend. Fair market value of the painting is Rs. 84,252.
Archaeological collection received from her mother. Fair market value of such
archaeological collection is Rs. 1,25,848.
Jewellery received from her relatives on her birthday. Fair market value of the jewellery is
Rs. 2,84,848.
Advise her regarding the tax treatment of above items.
Solution
Any prescribed movable property received without consideration (i.e., received by way of a
gift) by an individual/HUF is charged to tax, if the following conditions are satisfied:
(i) Any prescribed movable property is received by an individual or HUF on or after 1-10-
2009.
(ii) Such property is received without consideration.
(iii) The aggregate fair market value of such properties received by the assessee during the
previous year exceeds Rs. 50,000.
Prescribed movable property means shares/securities, jewellery, archaeological collections,
drawings, paintings, sculptures or any work of art and with effect from 1-6-2010 bullion,
being capital asset of the assessee.
In the above case, the fair market value of the prescribed movable property will be treated as
income of the receiver.
Nothing contained in aforesaid provisions will apply to the following cases:
Property received from relatives (see illustration 4 for the meaning of a relative).
(As amended by Finance Act, 2013)source : www.trpscheme.com
Property received by a HUF from its members.
Property received on occasion of the marriage of the individual.
Property received under Will/ by way of inheritance.
Property received in contemplation of death of the payer or donor.
Property received from a local authority.
Property received from any fund, foundation, university, other educational institution,
hospital or other medical institution, any trust or institution referred to in section 10(23C).
Considering above provisions, the tax treatment of various items received by Miss Khushi
will be as follows:
In respect of painting received from her friend, the fair market value of the painting, i.e.,
Rs. 84,252 will be treated as her taxable income.
Nothing will be charged to tax in respect of archaeological collection received from her
mother, since mother comes under the definition of relative.
Nothing will be charged to tax in respect of jewellery received from her relatives on her
birthday.
Specified movable property received without adequate consideration by an
individual
Illustration 8
During the year 2012-13, Mr. Shan purchased the following capital assets:
Shares purchased for Rs. 2,84,252, the fair market value of the shares is Rs. 3,25,000.
Sculptures purchased for Rs. 3,85,000; the fair market value of the sculptures is Rs.
4,50,000.
Motor-car purchased for Rs. 8,84,000; the fair market value of motor-car is Rs. 8,00,000.
Advise him regarding the tax treatment of above items.
Solution
Any prescribed movable property acquired for less than its fair market value by an
individual/HUF is charged to tax if the following conditions are satisfied:
(i) Any prescribed movable property is received by an individual or HUF on or after 1-10-
2009.
(ii) Such property is received for a consideration, but aggregate fair market value of such
properties received by the assessee during the previous year exceeds the consideration of
these properties by Rs. 50,000. In other words, the aggregate fair market value of all
such properties is higher than the consideration and the aggregate gap is more than Rs.
50,000.
Prescribed movable property means shares/securities, jewellery, archaeological collections,
drawings, paintings, sculptures or any work of art and with effect from 1-6-2010 bullion,
being capital asset of the assessee.
In above case, aggregate fair market value in excess of aggregate consideration of such
properties will be charged to tax.
Nothing contained in aforesaid provisions will apply to the following cases:
Property received from relatives (see illustration 4 for the meaning of relative).
Property received by a HUF from its members.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Property received on occasion of the marriage of the individual.
Property received under Will/ by way of inheritance.
Property received in contemplation of death of the payer or donor.
Property received from a local authority.
Property received from any fund, foundation, university, other educational institution,
hospital or other medical institution, any trust or institution referred to in section 10(23C).
Considering above provisions, the tax treatment of various items received by Mr. Shan will
be as follows:
The above provisions will apply only in respect of prescribed movable property.
Considering the definition of prescribed movable property, shares and sculptures will
only come in the definition of prescribed movable property.
The fair market value of shares and sculptures is Rs. 3,25,000 and Rs. 4,50,000,
respectively, and the purchase price is Rs. 2,84,252 and Rs. 3,85,000 respectively. The
excess of fair market value over the purchase price will amount to Rs. 1,05,748 (Rs.
40,748 for shares and Rs. 65,000 for sculptures). Hence, Rs. 1,05,748 will be charged to
tax in respect of purchase of shares and sculptures.
Motor-car does not come under the definition of prescribed movable property. Hence,
nothing will be taxed in respect of purchase of motor-car.
Illustration 9
During the year 2012-13, Miss Khushi purchased the following assets:
A plot of land for Rs. 8,25,252. The value adopted by the Stamp Valuation Authority for
charging stamp duty is Rs. 10,52,000.
A residential building from her friend, Miss Khushali for Rs. 48,84,000. The value
adopted by the Stamp Valuation Authority for charging stamp duty is Rs. 55,00,000.
A plot of land (being a rural agricultural land) for Rs. 8,40,000; the fair market value of
the land is Rs. 12,52,000.
Apart from above, she also received rural agricultural land (fair market value of the land is
Rs. 25,52,000) by way of gift from her mother. Advise her regarding the tax treatment of
above assets.
Solution
In respect of immovable property, the provision of section 56 will apply only when the
immovable property is received without adequate consideration. In other words, nothing
will be charged to tax in respect of immovable property acquired for less than the value
adopted by the Stamp Valuation Authority for charging stamp duty. Hence, in this case
nothing will be charged to tax in respect of plot of land and residential building purchased
by Miss Khushi.
Rural agricultural land is not a capital asset. The provision of section 56 applies only in
respect of property which is in the nature of capital asset of the purchaser. Rural
agricultural land is not a capital asset, hence, nothing will be charged to tax in respect of
agricultural land purchased by her as well as agricultural land received by her as gift.
Illustration 10
On 8-4-2012, Miss Khushi acquired gold jewellery (fair market value is Rs. 84,252) from
Mrs. Sharma for Rs. 72,848. Further, on 30-9-2012, she acquired drawings (fair market value
(As amended by Finance Act, 2013)source : www.trpscheme.com
is Rs. 52,200) from Mrs. Kapoor for Rs. 25,100. Miss Khushi is confused regarding the tax
consequences arising in respect of above items purchased by her. Advise her in this regard.
Solution
In this situation, nothing will be charged to tax in the hands of Miss Khushi, since the
aggregate of excess of fair market value of gold jewellery and drawings does not exceed Rs.
50,000.
If in above situation the fair market value of gold jewellery is Rs. 1,84,252 instead of Rs.
84,252, then the aggregate of excess of fair market value of gold jewellery and drawings will
be charged to tax in the hands of Miss Khushi. In other words, Rs. 1,38,504 (Rs. 1,11,404
excess fair market value of gold jewellery + Rs. 27,100 excess fair market value of
drawings), will be charged to tax as income from other sources.
Tax treatment of amount received from life insurance policy
Illustration 11
On 8-4-2012, Mr. Raja takes a life insurance policy. Sum assured is Rs. 25,00,000 and
annual premium is Rs. 84,000. The policy will mature in 2028. Maturity value will be
Rs. 18,00,000.
Advise him regarding the tax treatment of amount to be received from above policy.
**
Any amount received under a life insurance policy, including bonus is exempt from
tax under section 10(10D). However, following points should be noted in this regard:
Exemption is available only in respect of amount received from life insurance
policy.
Exemption under section 10(10D) is unconditionally available in respect of sum
received for a policy which is issued on or before March 31st, 2003, however, in
respect of policies issued on or after April 1st, 2003, the exemption is available
only if the amount of premium paid on such policy in any financial year does not
exceed 20% (10% in respect of policy taken on or after April 1st, 2012) of the
actual capital sum assured. Amount received on death of the person will continue
to be exempt without any condition.
Value of premium agreed to be returned or of any benefit by way of bonus (or
otherwise), over and above the sum actually assured, which is received under the
policy by any person, shall not be taken into account while calculating the actual
capital sum assured.
In this case policy is taken after 1-4-2012 and, hence, tax treatment will be as follows:
o Nothing will be charged to tax in respect of amount received on death of
Mr. Raja.
o In any other case, the amount received from policy will be exempt, if the
annual premium of any financial year does not exceed 10% of the capital
sum assured. The capital sum assured in this case is Rs. 25,00,000 and 10%
of Rs. 25,00,000 works out to be Rs. 2,50,000. The annual premium of the
policy is only Rs. 84,000. Hence, nothing will be taxed on account of
amount received otherwise than on death.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Specific disallowances while computing income chargeable to tax under the head
“Income from other sources”
Illustration 12
Mr. Raja is engaged in the business of horse race. During the previous year 2012-13,
he incurred a loss of Rs. 1,84,000. He also won Rs. 2,52,000 from lotteries. He wants
to set off his business loss of Rs. 1,84,000 against winnings of Rs. 2,52,000 from
lotteries and also wants to claim deduction under section 80C of Rs. 84,000. Can he
do so?
**
While computing income under the head “Income from other sources” following
items are not deductible:
No deduction is permissible under section 57.
Losses cannot be set off under sections 70, 71 and 72 against winnings from lotteries,
crossword puzzles, races, including horse races, card games and other games of any
sort or from gambling or betting of any form or nature.
No deduction is permissible under sections 80C to 80U.
Considering the above discussed provisions, Mr. Raja cannot set off his loss of Rs.
1,84,000 from the business of horse race against the winnings of Rs. 2,52,000 from
lotteries. Moreover, he cannot claim deduction of Rs. 84,000 under section 80C
against such winnings from lotteries of Rs. 2,52,000.
(As amended by Finance Act, 2013)source : www.trpscheme.com
FAQs
1. Which incomes are charged to tax under the head “Income from other
sources”? Explain with the help of illustration.
Following illustrations will explain the incomes which are charged to tax under the head
“Income from other sources”.
Illustration 1
Mr. Kapoor is a trader in shares. He held several shares as stock-in-trade. During the year
2012-13, he received Rs. 84,252 as dividend on shares held by him as stock-in-trade. He
wants to treat the dividend income of Rs. 84,252 as business income. However, his
accountant advised him that dividend income is always taxed as income from other sources.
Mr. Kapoor is confused in this regard; hence, he wants to know the provisions of taxability of
any income under the head of income from other sources. Advise him in this regard.
Solution
“Income from other sources” is the last and residual head of income. Hence, any income
which is not specifically taxed under any other head of income will be taxed under this head.
Further, there are certain incomes which are always taxed under this head. These incomes are
as follows:
As per section 56(2)(i), dividends from domestic company are always taxed under this
head. However, dividends other than those covered by section 2(22)(e) are exempt from
tax under section 10(34).
Winnings from lotteries, crossword puzzles, races including horse races, card games and
other game of any sort, gambling or betting of any form whatsoever, are always taxed
under this head.
With effect from the assessment year 2010-11, income by way of interest received on
compensation or on enhanced compensation shall be chargeable to tax under the head
“Income from other sources”, and such income shall be deemed to be the income of the
year in which it is received, irrespective of the method of accounting followed by the
assessee. Further, such interest income shall be charged to tax under the head “Income
from other sources”; however, deduction of a sum equal to 50% of such income shall be
allowed from such income (apart from this, no other deduction shall be allowed from such
an income).
Gifts are also taxed under this head.
In addition to above, following incomes are charged to tax under this head, if not taxed
under the head “Profits and gains of business or profession”.
(a) Any contribution to a fund for welfare of employees received by the employer [Section
56(2)(ic)].
(b) Income by way of interest on securities [Section 56(2)(id)].
(c) Income from letting out or hiring of plant, machinery or furniture [Section 56(2)(ii)].
(d) Income from letting out of plant, machinery or furniture along with building and both
the lettings are inseparable [Section 56(2)(iii)].
(e) Any sum received under a Keyman Insurance Policy including bonus [Section
56(2)(iv)].
(As amended by Finance Act, 2013)source : www.trpscheme.com
Income chargeable to tax under the head “Income from other sources” is to be computed in
accordance with the method of accounting regularly employed by the assessee. However,
method of accounting does not affect basis of charge in case of dividend income.
Considering above provisions, dividend of Rs. 84,252 will be taxed under the head “Income
from other sources”; however, by virtue of section 10(34), dividend income is exempt from
tax and, hence, the entire dividend income of Rs. 84,252 will not be liable to tax.
Illustration 2
During the previous year 2012-13, Mr. Soham wins Rs. 2,52,000 (net of deduction of
tax at source) from card games. Advise him regarding the taxability of winnings from
card game of Rs. 2,52,000.
**
Under sections 194B and 194BB, tax is deductible @ 30% on payment made in
respect of winnings from lotteries or crossword puzzle or card games or other games if
the payment exceeds Rs. 10,000. In case of winnings from horse races, payments
exceeding Rs. 5,000 are subject to deduction of tax at source at the rate of 30%. If net
amount received is given, then the net amount shall be grossed up to find out the
amount chargeable to tax. The mode of conversion is as follows:
Net amount
(1- 0.3)
Considering the above discussed provisions, Rs. 3,60,000 [i.e., Rs. 2,52,000/ (1-
0.30)] will be charged to tax under the head “Income from other sources”.
2. Explain with the help of illustration the relevance of method of accounting
while computing income charged to tax under the head “Income from other
sources”.
Following illustration will explain the relevance of method of accounting while
computing income charged to tax under the head “Income from other sources”.
Illustration 3
Ascertain the head of taxability of the incomes given below:
Dividend of Rs. 1,84,000 received by Mr. Raja from an Indian company.
Lease rent of vacant plot of land of Rs. 52,200 received by Mr. Kumar.
Rs. 8,400 won by Mr. Shan from a crossword puzzle.
Rs. 2,52,000 received by Mr. Kumar from his friends on his wedding anniversary.
Rent of building let out along with certain amenities of Rs. 1,52,000 (Rs. 1,00,000
pertain to rent of building and Rs. 52,000 towards other amenities) received by Mr.
Subham.
Compensation amounting to Rs. 1,25,252 received by Mr. Sohil from the
Government for compulsory acquisition of Industrial land.
Interest of Rs. 8,252 received by Mr. Sahil on a bank deposit.
**
(As amended by Finance Act, 2013)source : www.trpscheme.com
Nature of income Head of taxability
Dividend of Rs. 1,84,000 received by
Mr. Raja from an Indian company.
Dividend is always charged to tax
under the head “Income from other
sources”. However, dividends from
domestic company except dividends
covered by section 2(22)(e) are exempt
from tax under section 10(34).
Lease rent of vacant plot of land of Rs.
52,200 received by Mr. Kumar.
Lease rent from vacant land is always
charged to tax under the head “Income
from other sources”.
Rs. 8,400 won by Mr. Shan from a
crossword puzzle.
Income by way of winnings from
lotteries, crossword puzzles, races
including horse races, card game and
other game of any sort, gambling or
betting of any form whatsoever, are
always charged to tax under the head
“Income from other sources”. Hence,
Rs. 8,400 won from a crossword
puzzle will be charged to tax under the
head “Income from other sources”.
Rs. 2,52,000 received by Mr. Kumar
from his friends on his wedding
anniversary.
Gifts received by an individual or HUF
(which are charged to tax) are taxed
under the head “Income from other
sources”. In this case, gift is received
from friends and it exceeds Rs. 50,000.
Hence, entire amount will be charged
to tax under the head “Income from
other sources”.
Rent of building let out along with
certain amenities of Rs. 1,52,000 (Rs.
1,00,000 pertain to rent of building and
Rs. 52,000 towards other amenities)
received by Mr. Subham.
Rent of building will be charged to tax
under the head “Income from house
property” and rent of amenities will be
charged to tax under the head “Income
from other sources”. This rule is
applicable even if the assessee receives
a composite rent. Hence, rent of
building of Rs. 1,00,000 is not charged
to tax under the head “Income from
other sources”.
Compensation amounting to Rs.
1,25,252 received by Mr. Sohil from
the Government for compulsory
acquisition of Industrial land.
Income received in respect of
compensation or enhanced
compensation for compulsory
acquisition of property is not charged
to tax under the head “Income from
other sources”. Only interest amount
(As amended by Finance Act, 2013)source : www.trpscheme.com
received on compensation or enhanced
compensation is charged to tax under
the head “Income from other sources”.
Hence, nothing will be taxable from
Rs. 1,25,252 received by Mr. Sohil.
Interest of Rs. 8,252 received by Mr.
Sahil on a bank deposit.
Interest on bank deposits is charged to
tax under the head “Income from other
sources”.
3. Explain with the help of illustration the tax treatment of sum of money
received without consideration (commonly known as monetary gift) by an
individual.
Following illustrations will explain the tax treatment of sum of money received
without consideration (commonly known as monetary gift) by an individual.
Illustration 4
During the year 2012-13, Mr. Raja received a gift of Rs. 2,84,848 from his father. Apart from
gift of Rs. 2,84,848, he received gift of Rs. 1,25,252 from his friends residing abroad and gift
of Rs. 25,000 from friends of his spouse on his wedding anniversary. To understand the
taxability of the gifts, he approaches you. Advise him in this regard.
Solution
Any sum of money (i.e., generally known as gift) received by an individual/HUF without
adequate consideration is charged to tax, if the following conditions are satisfied:
(i) The sum of money is received by an individual or HUF on or after 1-10-2009.
(ii) Such sum of money is received without consideration.
(iii) The aggregate value of such sum received during aforesaid period exceeds Rs. 50,000.
Nothing contained in the aforesaid provisions will apply in the following cases:
Money received from relatives (see note 1 below).
Money received by a HUF from its members.
Money received on occasion of the marriage of the individual.
Money received under Will/ by way of inheritance.
Money received in contemplation of death of the payer or donor.
Money received from a local authority.
Money received from any fund, foundation, university, other educational institution,
hospital or other medical institution, any trust or institution referred to in section 10(23C).
Money received from a trust or institution registered under section 12AA.
Note 1: Relative for this purpose means:
(a) Spouse of the
individual;
(b) Brother or sister of
(c) Brother or sister of the
spouse of the individual;
(d) Brother or sister of
(e) Any lineal ascendant or
descendent of the individual;
(f) Any lineal ascendant or
(As amended by Finance Act, 2013)source : www.trpscheme.com
the individual; either of the parents of the
individual;
descendent of the spouse of
the individual;
(g) Spouse of the person
referred to in (b) to (f)
Considering the above provisions, the tax treatment of gifts in the hands of Mr. Raja will be
as follows:
Gift received from father will not be taxed, since father falls under the definition of a
relative. Hence, nothing will be charged to tax in respect of gift of Rs. 2,84,848 received
from father.
Gift received from any person other than relative and otherwise than on prescribed
occasions is fully taxed. Hence, gift of Rs. 1,25,252 received from friends of Mr. Raja
residing abroad and gift of Rs. 25,000 received from friends of spouse of Mr. Raja on the
occasion of his wedding anniversary will be fully taxed.
Illustration 5
During the year 2012-13, Mr. Kapoor received following gifts from his friends on the
occasion of the marriage of his daughter.
Rs. 38,200 on 5-7-2012
Rs. 8,400 on 23-3-2013
What will be the tax treatment of above gifts?
Solution
Sum of money received without adequate consideration (i.e., a gift) from any person other
than relatives (see previous illustration for meaning of relative) and otherwise than on
prescribed occasions is charged to tax, if the aggregate amount of such gifts exceeds Rs.
50,000.
In this case, the gift is received from person other than relatives and otherwise than on
prescribed occasions, hence, entire amount of gift will be charged to tax, if the aggregate
amount of gift exceeds Rs. 50,000.
The aggregate amount of gift comes to Rs. 46,600 which is below Rs. 50,000, hence, nothing
will be charged to tax in the hands of Mr. Kapoor.
Suppose in the above case, the amount of second gift is Rs. 18,400 instead of Rs. 8,400, then
the aggregate amount of gift will come to Rs. 56,600. In this case, entire amount of Rs.
56,600 will be charged to tax in the hands of Mr. Kapoor.
4. Explain with the help of illustration the tax treatment of immovable property
received without consideration/adequate consideration by an individual.
Following illustration will explain the tax treatment of immovable property received
without consideration/adequate consideration by an individual.
Illustration 6
On 1-8-2012, Mr. Soham gifted a plot of land to his friend Mr. Sumit. The market value of
such plot was Rs. 25,84,252 and the value of the plot adopted by the Stamp Valuation
Authority for charging stamp duty was Rs. 30,25,000. On 23-3-2013, Mr. Sumit purchased a
residential building (building P) from one of his friends. The building was purchased for Rs.
52,25,252. However, the value of the building adopted by the Stamp Valuation Authority for
(As amended by Finance Act, 2013)source : www.trpscheme.com
charging stamp duty was Rs. 60,00,000. Advise Mr. Sumit regarding the tax treatment of
above items.
Solution
Any immovable property received without consideration (i.e., received by way of a gift) by
an individual/HUF is charged to tax, if the following conditions are satisfied:
(i) Any immovable property is received by an individual or HUF on or after 1-10-2009.
(ii) Such property is received without consideration.
(iii) The stamp duty value of such property exceeds Rs. 50,000.
In above case, the stamp duty value of the property adopted by the Stamp Valuation
Authority for charging stamp duty will be treated as income of the receiver.
Nothing contained in aforesaid provisions will apply in the following cases:
Property received from relatives (see illustration 4 for meaning of a relative).
Property received by a HUF from its members.
Property received on occasion of the marriage of the individual.
Property received under Will/ by way of inheritance.
Property received in contemplation of death of the payer or donor.
Property received from a local authority.
Property received from any fund, foundation, university, other educational institution,
hospital or other medical institution, any trust or institution referred to in section 10(23C).
Considering above provisions, full stamp duty value in respect of plot of land of Rs.
30,25,000 will be charged to tax in the hands of Mr. Sumit. However, nothing will be taxed in
respect of building P since if any immovable property is acquired for a consideration which is
less than stamp duty value then nothing will be taxable in the hands of recipient even though
the difference between stamp duty and consideration paid/payable exceeds Rs. 50,000.
5. Explain with the help of illustration the tax treatment of specified movable
property received without consideration (commonly known as non-monetary
gift) by an individual.
Following illustration will explain the tax treatment of specified movable property
received without consideration (commonly known as non-monetary gift) by an
individual.
Illustration 7
During the year 2012-13, Miss Khushi received following gifts from her relatives/friends:
Painting received from her friend. Fair market value of the painting is Rs. 84,252.
Archaeological collection received from her mother. Fair market value of archaeological
collection is Rs. 1,25,848.
Jewellery received from her relatives on her birthday. Fair market value of the jewellery is
Rs. 2,84,848.
Advise her regarding the tax treatment of above items.
Solution
Any prescribed movable property received without consideration (i.e., received by way of a
gift) by an individual/HUF is charged to tax, if the following conditions are satisfied:
(As amended by Finance Act, 2013)source : www.trpscheme.com
(i) Any prescribed movable property is received by an individual or HUF on or after 1-10-
2009.
(ii) Such property is received without consideration.
(iii) The aggregate fair market value of such properties received by the assessee during the
previous year exceeds Rs. 50,000.
Prescribed movable property means shares/securities, jewellery, archaeological collections,
drawings, paintings, sculptures or any work of art and with effect from 1-6-2010 bullion,
being capital asset of the assessee.
In above case, the fair market value of the prescribed movable property will be treated as
income of the receiver.
Nothing contained in aforesaid provisions will apply in the following cases:
Property received from relatives (see illustration 4 for the meaning of a relative).
Property received by a HUF from its members.
Property received on occasion of the marriage of the individual.
Property received under Will/ by way of inheritance.
Property received in contemplation of death of the payer or donor.
Property received from a local authority.
Property received from any fund, foundation, university, other educational institution,
hospital or other medical institution, any trust or institution referred to in section 10(23C).
Considering above provisions, the tax treatment of various items received by Miss Khushi
will be as follows:
In respect of painting received from her friend, the fair market value of the painting, i.e.,
Rs. 84,252 will be treated as her taxable income.
Nothing will be charged to tax in respect of archaeological collection received from her
mother, since mother comes under the definition of relative.
Nothing will be charged to tax in respect of jewellery received from her relatives on her
birthday.
6. Explain with the help of illustration the tax treatment of specified movable
property received without adequate consideration by an individual.
Following illustrations will explain the tax treatment of specified movable property
received without adequate consideration by an individual.
Illustration 8
During the year 2012-13, Mr. Shan purchased the following capital assets:
Shares purchased for Rs. 2,84,252; the fair market value of the shares is Rs. 3,25,000.
Sculptures purchased for Rs. 3,85,000; the fair market value of the sculptures is Rs.
4,50,000.
Motor-car purchased for Rs. 8,84,000; the fair market value of motor-car is Rs. 8,00,000.
Advise him regarding the tax treatment of above items.
Solution
Any prescribed movable property acquired for less than its fair market value by an
individual/HUF is charged to tax if the following conditions are satisfied:
(As amended by Finance Act, 2013)source : www.trpscheme.com
(i) Any prescribed movable property is received by an individual or HUF on or after 1-10-
2009.
(ii) Such property is received for a consideration, but aggregate fair market value of such
properties received by the assessee during the previous year exceeds the consideration of
these properties by Rs. 50,000. In other words, the aggregate fair market value of all
such properties is higher than the consideration and the aggregate gap is more than Rs.
50,000.
Prescribed movable property means shares/securities, jewellery, archaeological collections,
drawings, paintings, sculptures or any work of art and with effect from 1-6-2010 bullion,
being capital asset of the assessee.
In above case, aggregate fair market value in excess of aggregate consideration of such
properties will be charged to tax.
Nothing contained in aforesaid provisions will apply in the following cases:
Property received from relatives (see illustration 4 for the meaning of relative).
Property received by a HUF from its members.
Property received on occasion of the marriage of the individual.
Property received under Will/ by way of inheritance.
Property received in contemplation of death of the payer or donor.
Property received from a local authority.
Property received from any fund, foundation, university, other educational institution,
hospital or other medical institution, any trust or institution referred to in section 10(23C).
Considering above provisions, the tax treatment of various items received by Mr. Shan will
be as follows:
The above provisions will apply only in respect of prescribed movable property.
Considering the definition of prescribed movable property, shares and sculptures will
only come in the definition of prescribed movable property.
The fair market value of shares and sculptures is Rs. 3,25,000 and Rs. 4,50,000,
respectively, and the purchase price is Rs. 2,84,252 and Rs. 3,85,000 respectively. The
excess of fair market value over the purchase price will amount to Rs. 1,05,748 (Rs.
40,748 for shares and Rs. 65,000 for sculptures). Hence, Rs. 1,05,748 will be charged to
tax in respect of purchase of shares and sculptures.
Motor-car does not come under the definition of prescribed movable property. Hence,
nothing will be taxed in respect of purchase of motor-car.
Illustration 9
During the year 2012-13, Miss Khushi purchased the following assets:
A plot of land for Rs. 8,25,252. The value adopted by the Stamp Valuation Authority for
charging stamp duty is Rs. 10,52,000.
A residential building from her friend Miss Khushali for Rs. 48,84,000. The value
adopted by the Stamp Valuation Authority for charging stamp duty is Rs. 55,00,000.
A plot of land (being a rural agricultural land) for Rs. 8,40,000; the fair market value of
the land is Rs. 12,52,000.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Apart from above, she also received rural agricultural land (fair market value of the land is
Rs. 25,52,000) by way of gift from her mother. Advise her regarding the tax treatment of
above assets.
Solution
In respect of immovable property, the provision of section 56 will apply only when the
immovable property is received without adequate consideration. In other words, nothing
will be charged to tax in respect of immovable property acquired for less than the value
adopted by the Stamp Valuation Authority for charging stamp duty. Hence, in this case
nothing will be charged to tax in respect of plot of land and residential building purchased
by Miss Khushi.
Rural agricultural land is not a capital asset. The provision of section 56 applies only in
respect of property which is in the nature of capital asset of the purchaser. Rural
agricultural land is not a capital asset, hence, nothing will be charged to tax in respect of
agricultural land purchased by her as well as agricultural land received by her as gift.
Illustration 10
On 8-4-2012, Miss Khushi acquired gold jewellery (fair market value is Rs. 84,252) from
Mrs. Sharma for Rs. 72,848. Further, on 30-9-2012, she acquired drawings (fair market value
is Rs. 52,200) from Mrs. Kapoor for Rs. 25,100. Miss Khushi is confused regarding the tax
consequences arising in respect of above items purchased by her. Advise her in this regard.
Solution
In this situation, nothing will be charged to tax in the hands of Miss Khushi, since the
aggregate of excess of fair market value of gold jewellery and drawings does not exceed Rs.
50,000.
If in above situation the fair market value of gold jewellery is Rs. 1,84,252 instead of Rs.
84,252, then the aggregate value of excess of fair market value of gold jewellery and
drawings will be charged to tax in the hands of Miss Khushi. In other words, Rs. 1,38,504
(Rs. 1,11,404 excess fair market value of gold jewellery + Rs. 27,100 excess fair market
value of drawings), will be charged to tax as income from other sources.
7. Explain the tax treatment of maturity amount received from life insurance
policy.
Following illustration will explain the tax treatment of maturity amount received from life
insurance policy.
Illustration 11
On 8-4-2012, Mr. Raja takes a life insurance policy. Sum assured is Rs. 25,00,000 and
annual premium is Rs. 84,000. The policy will mature in 2028. Maturity value will be
Rs. 18,00,000.
Advise him regarding the tax treatment of amount to be received from above policy.
**
Any amount received under a life insurance policy, including bonus is exempt from
tax under section 10(10D). However, following points should be noted in this regard:
Exemption is available only in respect of amount received from life insurance
policy.
Exemption under section 10(10D) is unconditionally available in respect of sum
received for a policy which is issued on or before March 31st, 2003. However, in
respect of policies issued on or after April 1st, 2003, the exemption is available
(As amended by Finance Act, 2013)source : www.trpscheme.com
only if the amount of premium paid on such policy in any financial year does not
exceed 20% (10% in respect of policy taken on or after April 1st, 2012) of the
actual capital sum assured. It should be noted that amount received on death of the
person will continue to be exempt without any condition.
Value of premium agreed to be returned or of any benefit by way of bonus (or
otherwise), over and above the sum actually assured, which is received under the
policy by any person, shall not be taken into account while calculating the actual
capital sum assured.
In this case, policy is taken after 1-4-2012 and, hence, tax treatment will be as follows:
o Nothing will be charged to tax in respect of amount received on death of
Mr. Raja.
o In any other case, the amount received from policy will be exempt, if the
annual premium of any financial year does not exceed 10% of the capital
sum assured. The capital sum assured in this case is Rs. 25,00,000 and 10%
of 25,00,000 works out to be Rs. 2,50,000. The annual premium of the
policy is only Rs. 84,000. Hence, nothing will be taxed on account of
amount received otherwise than on death.
8. Which are the specific disallowances while computing income chargeable to
tax under the head “Income from other sources”?
Following illustration will explain the specific disallowances while computing income
chargeable to tax under the head “Income from other sources”.
Illustration 12
Mr. Raja is engaged in the business of horse race. During the previous year 2012-13,
he incurs a loss of Rs. 1,84,000. He also wins Rs. 2,52,000 from lotteries. He wants to
set off his business loss of Rs. 1,84,000 against winnings of Rs. 2,52,000 from
lotteries and also wants to claim deduction under section 80C of Rs. 84,000. Can he
do so?
**
While computing income under the head “Income from other sources” following
items are not deductible:
No deduction is permissible under section 57.
Losses cannot be set off under sections 70, 71 and 72 against winnings from lotteries,
crossword puzzles, races including horse races, card games and other games of any
sort or from gambling or betting of any form or nature.
No deduction is permissible under sections 80C to 80U.
Considering the above discussed provisions, Mr. Raja cannot set off his loss of Rs.
1,84,000 from the business of horse race against the winnings of Rs. 2,52,000 from
lotteries. Moreover, he cannot claim deduction of Rs. 84,000 under section 80C
against such winnings from lotteries of Rs. 2,52,000.
(As amended by Finance Act, 2013)source : www.trpscheme.com
MCQs
Q1. As per section _______, “Income from other sources” is the last and residual head
of income and, hence, any income which does not fall under any other head is charged
to tax under this head.
(a) 17 (b) 22
(c) 28 (d) 56
Correct answer: (d)
Justification of correct answer:
As per section 56, “Income from other sources” is the last and residual head of income and,
hence, any income which does not fall under any other head is charged to tax under this head.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
section. The other options, viz., options (a), (b) and (c) giving incorrect sections are not
correct.
Q2. Which of the following incomes are always charged to tax under the head “Income
from other sources”?
(a) Winning from lotteries (b) Gift
(c) Interest on securities (d) All of the above
Correct answer: (d)
Justification of correct answer:
As per section 56(2), following incomes are always taxable under the head “Income from
other sources”. These incomes are as follows:
As per section 56(2)(i), dividends from domestic company are always taxed under this
head; however, dividends other than those covered by section 2(22)(e) are exempt from
tax under section 10(34).
Winnings from lotteries, crossword puzzles, races including horse races, card games and
other game of any sort, gambling or betting of any form whatsoever, are always taxed
under this head.
With effect from the assessment year 2010-11, income by way of interest received on
compensation or on enhanced compensation shall be chargeable to tax under the head
“Income from other sources”, and such income shall be deemed to be the income of the
year in which it is received, irrespective of the method of accounting followed by the
assessee. Further, such interest income shall be charged to tax under the head “Income
from other sources”. However, deduction of a sum equal to 50% of such income shall be
allowed from such income (apart from this, no other deduction shall be allowed from such
an income).
Gifts are also taxed under this head.
In addition to above, following incomes are charged to tax under this head, if not taxed
under the head “Profits and gains of business or profession”.
(a) Any contribution to a fund for welfare of employees received by the employer[Section
56(2)(ic)].
(b) Income by way of interest on securities [Section 56(2)(id)].
(As amended by Finance Act, 2013)source : www.trpscheme.com
(c) Income from letting out or hiring of plant, machinery or furniture [Section 56(2)(ii)].
(d) Income from letting out of plant, machinery or furniture along with building and both
the lettings are inseparable [Section 56(2)(iii)].
(e) Any sum received under a Keyman Insurance Policy including bonus [Section
56(2)(iv)].
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it covers all the
incomes taxable under this head. The other options, viz., options (a), (b) and (c) giving
individual income are not correct.
Q3. Is the method of accounting followed by the assessee relevant while computing
income chargeable to tax under the head “Income from other sources”?
(a) Yes (b) No
Correct answer: (a)
Justification of correct answer:
Income chargeable to tax under the head “Income from other sources” is computed in
accordance with the method of accounting regularly employed by the assessee.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
provisions. The other option, viz., option (b) giving the incorrect provisions is not correct.
Q4. As per section 56(2), any sum received under Keyman Insurance Policy is always
taxable under the head “Income from other sources”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 56(2), any sum received under Keyman Insurance Policy is taxable under the
head “Income from other sources” if the same is not taxed under the head “Profits and gains
of business or profession”.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q5. Mr. Raja received dividend of Rs. 84,000 during the previous year 2012-13 on
shares held by him as stock-in-trade. Under which of the following heads such dividend
of Rs. 84,000 is taxable?
(a) Profits and gains of business or profession
(b) Income from other sources
(c) (a) or (b) as per the choice of Mr. Raja
(d) (a) or (b) as per the choice of Assessing Officer
Correct answer: (b)
Justification of correct answer:
As per section 56(2), dividend income is always taxable under the head “Income from other
sources” whether it is received on shares held as stock-in-trade or as an investment.
Thus, option (b) is the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
head of income. The other options, viz., options (a), (c) and (d) giving the incorrect
head/provisions are not correct.
Q6. SM Ltd. received a sum of Rs. 1,84,000 from its employees during the previous year
2012-13 towards contribution to staff welfare scheme. Such contribution is taxable in
the hands of SM Ltd. under the head “Income from other sources” if the same is not
taxable under the head “Profits and gains of business or profession”.
(a) True (b) False
Correct answer: (a)
Justification of correct answer:
As per section 56(2), if the assessee received any sum from his employees towards
contribution to any staff welfare scheme it is taxable in the hands of employer under the head
“Income from other sources” if the same is not taxable under the head “Profits and gains of
business or profession”.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q7. As per the provisions of section 56(2), rental income from machinery, plant or
furniture let out on hire is taxable under the head “Income from other sources” if the
same is not taxable under the head “Income from house property”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 56(2), rental income from machinery, plant or furniture let out on hire is
taxable under the head “Income from other sources” if the same is not taxable under the head
“Profits and gains of business or profession”.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q8. As per the provisions of section 56(2), rental income in respect of letting out of
furniture along with letting out of building is taxable under the head “Income from
other sources” if such lettings are inseparable. However, rental income in respect of
letting out of plant and machinery along with letting out of building is always taxable
under the head “Income from house property”, even though such lettings are
inseparable.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 56(2), rental income in respect of letting out of plant, machinery or furniture
along with letting out of building is taxable under the head “Income from other sources” if
such lettings are inseparable and the rental income is not taxable under the head “Profits and
gains of business or profession”.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q9. Mr. Raja received a composite rent of Rs. 2,84,000 during the previous year 2012-
13 in respect of letting out of furniture along with letting out of residential building and
such lettings are inseparable. Under which of the following heads such rental income of
Rs. 2,84,000 is taxable?
(a) Income from House property
(b) Income from other sources
(c) Profits and gains of business or profession
(d) “Income from other sources” if it is not taxable under the head “Profits and gains of
business or profession”
Correct answer: (d)
Justification of correct answer:
As per section 56(2), rental income in respect of letting out of plant, machinery or furniture
along with letting out of building is taxable under the head “Income from other sources” if
such lettings are inseparable and the rental income is not taxable under the head “Profits and
gains of business or profession”.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
head of taxability. The other options, viz., options (a), (b) and (c) giving the incorrect head of
taxability are not correct.
Q10. Mr. Raja received a composite rent of Rs. 2,84,000 during the previous year 2012-
13 in respect of letting out of furniture along with letting out of residential building and
such lettings are inseparable. However, the rent of these two assets is fixed separately.
Hence, rent of building is taxable under the head “Income from house property” and
rent of furniture is taxable under the head “Income from other sources”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 56(2), rental income in respect of letting out of plant, machinery or furniture
along with letting out of building is taxable under the head “Income from other sources” if
such lettings are inseparable and the rental income is not taxable under the head “Profits and
gains of business or profession”. This rule is applicable, even though rent of both the assets is
fixed separately.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q11. As per the provisions of section 56(2), if building is let out along with certain
amenities like lift services, air-conditioning, fire fighting facilities, etc., then rental
income of building is taxable under the head “Income from house property” and rental
income of such amenities is taxable under the head “Income from other sources”, even
though the assessee receives composite rent from his tenant.
(a) True (b) False
Correct answer: (a)
(As amended by Finance Act, 2013)source : www.trpscheme.com
Justification of correct answer:
As per section 56(2), if building is let out along with certain amenities like lift services, air-
conditioning, fire fighting facilities, etc., then rental income of building is taxable under the
head “Income from house property” and rental income of such amenities is taxable under the
head “Income from other sources”, even though the assessee receives composite rent from his
tenant.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q12. Mr. Raja received a rent of Rs. 1,84,000 in respect of letting out of residential
building and rent of Rs. 52,200 in respect of providing other amenities like lift services
and fire fighting facilities during the previous year 2012-13. Hence, rent of Rs. 1,84,000
is taxable under the head___________ and rent of Rs. 52,200 is taxable under the head
__________.
(a) House property, Profits and gains of business or profession
(b) House property, House property
(c) Income from other sources, Income from other sources
(d) House property, Income from other sources
Correct answer: (d)
Justification of correct answer:
As per section 56(2), if building is let out along with certain amenities like lift services, air-
conditioning, fire fighting facilities, etc., then rental income of building is taxable under the
head “Income from house property” and rental income of such amenities is taxable under the
head “Income from other sources”.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
head of taxability. The other options, viz., options (a), (b) and (c) giving the incorrect head of
taxability are not correct.
Q13. Mr. Raja received a composite rent of Rs. 3,25,000 (Rs. 2,25,000 towards building
and Rs. 1,00,000 towards other amenities) during the previous year 2012-13 in respect
of letting out of residential building along with certain amenities like lift services and
fire fighting facilities. Hence, such rent of Rs. 3,25,000 is taxable under the head
“Income from other sources”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 56(2), if building is let out along with certain amenities like lift services, air-
conditioning, fire fighting facilities, etc., then rental income of building is taxable under the
head “Income from house property” and rental income of such amenities is taxable under the
head “Income from other sources”. This rule is applicable, even though the assessee receives
composite rent from his tenant. Hence, Rs. 2,25,000 is taxable under the head “Income from
house property” and Rs. 1,00,000 is taxable under the head “Income from other sources”.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q14. Under which of the following heads interest received on compensation or enhanced
compensation is taxable?
(a) Profits and gains of business or profession
(b) Capital gains
(c) Income from other sources
(d) Any of the above heads as per the choice of the assessee
Correct answer: (c)
Justification of correct answer:
As per section 56(2), any sum received as interest on compensation or enhanced
compensation is always taxable under the head “Income from other sources”.
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
head of taxability. The other options, viz., options (a), (b) and (d) giving the incorrect head of
taxability are not correct.
Q15. As per section 57(iv), _______ of interest received on compensation or enhanced
compensation is deductible.
(a) 25% (b) 50%
(c) 75% (d) 100%
Correct answer: (b)
Justification of correct answer:
As per section 56(2), any sum received as interest on compensation or enhanced
compensation is always taxable under the head “Income from other sources”. However, 50%
of such interest is deductible under section 57(iv).
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
percentage. The other options, viz., options (a), (c) and (d) giving the incorrect percentage are
not correct.
Q16. Mr. Raja received a sum of Rs. 1,68,000 during the previous year 2012-13 from the
Government as interest on compensation for compulsory acquisition of industrial land.
In this case, what will be the amount chargeable to tax under the head “Income from
other sources”?
(a) Nil (b) Rs. 1,68,000
(c) Rs. 84,000 (d) Any amount as per the choice of Mr. Raja
Correct answer: (c)
Justification of correct answer:
As per section 56(2), any sum received as interest on compensation or enhanced
compensation is always taxable under the head “Income from other sources”. However, 50%
of such interest is deductible under section 57(iv). Hence, from Rs. 1,68,000, Rs. 84,000 will
be deducted under section 57(iv) and balance Rs. 84,000 will be taxable as “Income from
other sources”.
Thus, option (c) is the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
amount. The other options, viz., options (a), (b) and (d) giving the incorrect amount are not
correct.
Q17. Mr. Raja is engaged in the business of organizing horse races. His gross receipts
from this business during the previous year 2012-13 were Rs. 8,84,000. Hence, such
income of Rs. 8,84,000 is taxable under the head “Profits and gains of business or
profession”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 56(2), winnings from lotteries, crossword puzzles, races including horse races,
card games and other games of any sort or from gambling or betting of any form or nature or
whatsoever are always chargeable to tax under the head “Income from other sources”. Hence,
Rs. 8,84,000 earned by Mr. Raja from business of organizing horse races are taxable under
the head “Income from other sources” and not under the head “Profits and gains of business
or profession”.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q18. Under which of the following heads income from sub-letting is taxable?
(a) House property (b) Profits and gains of business or profession
(c) Income from other sources (d) Capital Gains
Correct answer: (c)
Justification of correct answer:
As per section 56(1), income from sub-letting is taxable under the head “Income from other
sources”.
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
head of taxability. The other options, viz., options (a), (b) and (d) giving the incorrect head of
taxability are not correct.
Q19. Mr. Raja gave on rent a plot of land to SM Ltd. for arranging an exhibition and
received rent of Rs. 1,25,000 during the previous year 2012-13. His accountant is of the
opinion that such rental income of Rs. 1,25,000 is taxable under the head of “Income
from house property”. Is the opinion of accountant correct?
(a) Yes (b) No
Correct answer: (b)
Justification of correct answer:
As per section 56(1), rental income of plot of land is taxable under the head “Income from
other sources”. Hence, the opinion of accountant of Mr. Raja is not correct and such rental
income of Rs. 1,25,000 is taxable under the head “Income from other sources”.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provisions. The other option, viz., option (a) giving incorrect provisions is not correct.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Q20. Mr. Raja is a director in SM Ltd. and received a commission of Rs. 2,52,000
during the previous year 2012-13 for standing as a guarantor to bankers. Is such
commission of Rs. 2,52,000 taxable under the head “Salaries”?
(a) Yes (b) No
Correct answer: (b)
Justification of correct answer:
As per section 56(1), any sum received by the assessee as director‟s commission for standing
as guarantor to bankers is taxable under the head “Income from other sources”. Hence,
commission of Rs. 2,52,000 received by Mr. Raja is taxable under the head “Income from
other sources” and not under the head “Salaries”.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provisions. The other option, viz., option (a) giving incorrect provisions is not correct.
Q21. Salary received by the Member of Parliament is taxable under the head “Income
from other sources” and not under the head “Salaries”.
(a) True (b) False
Correct answer: (a)
Justification of correct answer:
As per section 56(1), salary received by a Member of Parliament is taxable in his hands under
the head “Income from other sources” and not under the head “Salaries”.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q22. During the previous year 2012-13, Mr. Kapoor received compensation of Rs.
84,252 towards use of his business assets. Under which of the following heads such
compensation of Rs. 84,252 will be taxable in the hands of Mr. Kapoor?
(a) Profits and gains of business or profession
(b) Income from other sources
(c) Capital Gains
(d) Any of the above as per the choice of Mr. Kapoor
Correct answer: (b)
Justification of correct answer:
As per section 56(1), any sum received as compensation towards use of business assets is
taxable in the hands of the assessee under the head of “Income from other sources”.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
head of taxability. The other options, viz., options (a), (c) and (d) giving incorrect head of
taxability are not correct.
Q23. Interest on securities issued by the Indian Government is taxable under the head
“Income from other sources”. However, interest on securities issued by a Foreign
Government is taxable under the head “Profits and gains of business or profession”.
(a) True (b) False
Correct answer: (b)
(As amended by Finance Act, 2013)source : www.trpscheme.com
Justification of correct answer:
As per section 56, interest on securities is taxable under the head “Income from other
sources” whether such securities are issued by the Indian Government or by the Foreign
Government.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q24. Mr. Raja won from lotteries a sum of Rs. 1,84,000 (after deducting the tax @ 30%)
during the previous year 2012-13. What is the amount chargeable to tax under the head
“Income from other sources”?
(a) Rs. 1,84,000
(b) Rs. 1,28,800
(c) Rs. 2,62,857
(d) Nothing will be taxable as “Income from other sources”
Correct answer: (c)
Justification of correct answer:
As per section 56(2), if net winnings from lotteries are given then such net amount will be
grossed up to find out the amount chargeable to tax under the head “Income from other
sources”. Gross amount will be computed as follows:
Net amount
[1-(0.30)]
Hence, gross amount chargeable to tax will be Rs. 2,62,857 [Rs. 1,84,000 / (1- 0.30)].
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
amount chargeable to tax. The other options, viz., options (a), (b) and (d) giving the incorrect
amount chargeable to tax are not correct.
Q25. As per the provisions of section 56(2), only winnings from lotteries, winnings from
races, winnings from betting, etc., are chargeable to tax under the head “Income from
other sources”. If receipt is not from winnings, then it is not taxable under section 56(2).
(a) True (b) False
Correct answer: (a)
Justification of correct answer:
As per section 56(2), only winnings from lotteries, winnings from races, winnings from
betting, etc., are chargeable to tax under the head “Income from other sources”. If receipt is
not from winnings, then it is not taxable under section 56(2).
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q26. Mr. Kapoor won Rs. 2,84,000 from horse race. At which rate such winnings of Rs.
2,84,000 will be chargeable to tax?
(a) 10.3% (b) 20.6%
(c) 30.9% (d) 103%
(As amended by Finance Act, 2013)source : www.trpscheme.com
Correct answer: (c)
Justification of correct answer:
As per section 56(2), gross winnings from lotteries, crossword puzzles, races including horse
races (other than income from the activity of owning and maintaining race horses), card
games or other games of any sort or from gambling or betting of any nature whatsoever are
chargeable to income-tax at a flat rate of 30% (+ SC + EC +SHEC) on the gross winnings. In
other words, such incomes are chargeable to tax @ 30.9%.
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
rate of taxability. The other options, viz., options (a), (b) and (d) giving the incorrect rates are
not correct.
Q27. Income chargeable to tax under the head “Income from other sources” is to be
computed in accordance with the method of accounting regularly employed by the
assessee. However, method of accounting does not affect the basis of charge in case of
interest on securities.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 56(2), income by way of interest on securities is taxable on “receipt” basis if
the assessee maintains books of account on “cash” basis and in case of assessee who
maintains the books of account on “mercantile” basis, interest income will be charged to tax
on “due” basis.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q28. As per section 56(2), any sum of money/property received by partnership firm
without consideration on or after October 1, 2009 is chargeable to tax under the head
“Income from other sources”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 56(2), any sum of money/property received only by an individual or HUF
without consideration on or after October 1, 2009 is chargeable to tax under the head
“Income from other sources”. Hence, any sum of money/property received by partnership
firm without consideration on or after October 1, 2009 is not chargeable to tax under the head
“Income from other sources”.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q29. As per section 56(2), any sum of money (i.e., monetary gift) received in cash is
chargeable to tax under the head “Income from other sources”. However, any sum of
money (i.e., gift) received by a cheque or draft is not chargeable to tax under the head
“Income from other sources”.
(a) True (b) False
(As amended by Finance Act, 2013)source : www.trpscheme.com
Correct answer: (b)
Justification of correct answer:
As per section 56(2), any sum of money (i.e., gift in cash or by cheque or draft) is chargeable
to tax under the head “Income from other sources” if aggregate amount of gift received by an
individual or HUF during the year exceeds Rs. 50,000.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q30. During the previous year 2012-13, Mr. Raja received cash gift of Rs. 84,000 from
his father and cash gift of Rs. 25,200 from his friends on his birthday. In this case what
will be the amount chargeable to tax under the head “Income from other sources”?
(a) Nil (b) Rs. 84,000
(c) Rs. 25,200 (d) Rs. 1,09,200
Correct answer: (a)
Justification of correct answer:
As per section 56(2), any sum of money (i.e., gift in cash or by cheque or draft) is chargeable
to tax under the head “Income from other sources” only if aggregate amount of gift received
by an individual or HUF for the year exceeds Rs. 50,000. Moreover, any sum of
money/property received from relative is exempt and shall not be considered while
computing the limit of Rs. 50,000.
Hence, nothing will be charged to tax in respect of Rs. 84,000 received from his father since
father falls under the category of relative. In case of Rs. 25,200 received from his friends,
nothing will be charged to tax since the aggregate amount of gift does not exceed Rs. 50,000.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
amount. The other options, viz., options (b), (c) and (d) giving the incorrect amount are not
correct.
Q31. During the previous year 2012-13, Mr. Raja received cash gift of Rs. 52,000 from
his friends and cash gift of Rs. 8,400 from friends of his father on the occasion of his
marriage. In this case what will be the amount chargeable to tax under the head
“Income from other sources”?
(a) Nil (b) Rs. 84,000
(c) Rs. 25,200 (d) Rs. 1,09,200
Correct answer: (a)
Justification of correct answer:
As per section 56(2), any sum of money (i.e., gift in cash or by cheque or draft) is chargeable
to tax under the head “Income from other sources” only if aggregate amount of gift received
by an individual or HUF for the year exceeds Rs. 50,000. Moreover, any sum of
money/property received on the occasion of the marriage of an individual is exempt and shall
not be considered while computing the limit of Rs. 50,000.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Hence, nothing will be charged to tax in respect of Rs. 52,000 received from his friends and
Rs. 8,400 received from friends of his father since such cash gifts are received on the
occasion of the marriage of Mr. Raja‟s marriage.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
amount. The other options, viz., options (b), (c) and (d) giving the incorrect amounts are not
correct.
Q32. During the previous year 2012-13, Mr. Kapoor received cash gift of Rs. 1,52,000
from his friends and cash gift of Rs. 84,000 from friends of his wife on the occasion of
his wedding anniversary. In this case what will be the amount chargeable to tax under
the head “Income from other sources”?
(a) Nil (b) Rs. 84,000
(c) Rs. 1,52,000 (d) Rs. 2,36,000
Correct answer: (d)
Justification of correct answer:
As per section 56(2), any sum of money (i.e., gift in cash or by cheque or draft) is chargeable
to tax under the head “Income from other sources” only if aggregate amount of gift received
by an individual or HUF for the year exceeds Rs. 50,000.
Hence, Rs. 2,36,000 (i.e., Rs. 1,52,000 received from his friends and Rs. 84,000 received
from friends wife) on the occasion of the wedding anniversary of Mr. Kapoor will be charged
to tax under the head “Income from other sources”.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
amount. The other options, viz., options (a), (b) and (c) giving the incorrect amount are not
correct.
Q33. During the previous year 2012-13, Mr. Raja received a residential building by way
of inheritance. The fair market value of such building is Rs. 25,52,000. Hence, the fair
market value of the building will be charged to tax under the head “Income from other
sources”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 56(2), money received by an individual under Will/by way of inheritance is
not charged to tax. Hence, nothing will be charged to tax in the hands of Mr. Raja in respect
of building received by way of inheritance.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q34. Miss Khushi received Rs. 8,84,000 on account of Will of her grandfather. What
will be the amount chargeable to tax under the head “Income from other sources”?
(a) Rs. 8,84,000 (b) Rs. 8,34,000
(c) Rs. 50,000 (d) Nil
Correct answer: (d)
(As amended by Finance Act, 2013)source : www.trpscheme.com
Justification of correct answer
Money received on account of Will is covered in the prescribed exemptions and, hence,
nothing will be charged to tax from Rs. 8,84,000 received on account of will of her
grandfather.
Thus, option (d) is the correct option.
Comment on incorrect answer : Option (d) is the correct option since it gives the correct
amount of taxable gift. All the other options, viz., options (a), (b) and (c) giving incorrect
amount are not correct.
Q35. Money/property received in contemplation of death of the payer is charged to tax
under which of the following head?
(a) Profits and Gains of business or profession
(b) Income from other sources
(c) Capital gains
(d) It is not charged to tax at all (i.e., exempt income)
Correct answer: (d)
Justification of correct answer:
As per section 56(2) money/property received in contemplation of death of the payer is not
charged to tax under any head. In other words, it is exempt from tax.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
provisions. The other options, viz., options (a), (b) and (c) giving the incorrect head are not
correct.
Q36. Money/property received by an individual from local authority is not charged to
tax. However, money/property received by HUF from local authority is charged to tax
under the head “Income from other sources”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 56(2), money/property received from local authority is not charged to tax
whether it is received by an individual or by HUF.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q37. Is money/property received from a charitable institute registered under section
12AA taxable under the head “Income from other sources”?
(a) Yes (b) No
Correct answer: (b)
Justification of correct answer:
As per section 56(2), money/property received from a charitable institute registered under
section 12AA is not taxable. In other words, money/property received from charitable
institute registered under section 12AA is exempt from tax.
Thus, option (b) is the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provisions. The other option, viz., option (a) giving the incorrect provisions is not correct.
Q38. Kapoor HUF received cash gift of Rs. 1,84,848 from one of its members. Can such
gift of Rs. 1,84,848 be treated as gift received by Kapoor HUF from its relative?
(a) Yes (b) No
Correct answer: (a)
Justification of correct answer:
As per section 56(2), gift received by HUF from its members is treated as gift received from a
“relative”. Hence, gift of Rs. 1,84,848 received by Kapoor HUF from one of its members is
treated as gift received from its relative.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
provisions. The other option, viz., option (b) giving the incorrect provisions is not correct.
Q39. Mr. Raja is a ranker of third year of bachelor of commerce and received a gift of
Rs. 84,000 (by cheque) from an institution referred to in section 10(23C) during the
previous year 2012-13. Hence, such gift of Rs. 84,000 will be charged to tax under the
head “Income from other sources”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 56(2), money/property received from any fund, foundation, university, other
educational institution, hospital or other medical institution, any trust or institution referred to
in section 10(23C) is exempt from tax. Hence, gift of Rs. 84,000 received by Mr. Raja would
not be charged to tax.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q40. “Property” means which of the following capital assets of the assessee?
(a) Shares and securities (b) Jewellery
(c) Drawings (d) All of the above
Correct answer: (d)
Justification of correct answer:
As per section 56(2), “Property” means the following capital assets of the assessee (i.e.,
recipient):
(i) Immovable property being land or building or both
(ii) Shares and securities
(iii) Jewellery
(iv) Archaeological collections
(v) Drawings
(vi) Paintings
(vii) Sculptures
(As amended by Finance Act, 2013)source : www.trpscheme.com
(viii) Any work of art
(ix) Bullion (with effect from June 1, 2010)
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it covers all the capital
assets. The other options, viz., options (a), (b) and (c) giving the individual capital asset are
not correct.
Q41. During the previous year 2012-13, Mr. Raja received gift painting of Rs. 52,200
from brother of his spouse on inauguration of his office. Hence, such gift of Rs. 52,200
will be charged to tax since brother of spouse of Mr. Raja does not fall under the
definition of relative.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per section 56(2), and the definition of relative, brother or sister of the spouse of an
individual is treated as relative of an individual and money/property received from a relative
is not charged to tax. Hence, gift of Rs. 52,200 received by Mr. Raja from brother of his
spouse would not be charged to tax.
Thus, the statement given in the question is false and hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q42. Money received by an individual from his relatives is not charged to tax. The term
relative in this context covers any lineal ascendant or descendant of an individual. Does
it cover any lineal ascendant or descendant of the spouse of an individual?
(a) Yes (b) No
Correct answer: (a)
Justification of correct answer:
Money received by an individual from his relatives is not charged to tax. The term relative in
this context will cover:
(a) Spouse of the
individual;
(b) Brother or sister of
the individual;
(c) Brother or sister of the
spouse of the individual;
(d) Brother or sister of
either of the parents of the
individual;
(e) Any lineal ascendant or
descendent of the individual;
(f) Any lineal ascendant or
descendent of the spouse of
the individual;
(g) Spouse of the person
referred to in (b) to (f)
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
provisions. The other option, viz., option (b) giving the incorrect provisions is not correct.
Q43. During the previous year 2012-13, Mrs. Kapoor received gold ring of Rs. 8,400
from spouse of her brother-in-law. Hence, such gift of gold ring of Rs. 8,400 will not be
charged to tax since the spouse of the brother-in-law falls under the definition of
relative.
(a) True (b) False
(As amended by Finance Act, 2013)source : www.trpscheme.com
Correct answer: (a)
Justification of correct answer:
Money received by an individual from his relatives is not charged to tax. The term relative in
this context will cover:
(a) Spouse of the
individual;
(b) Brother or sister of
the individual;
(c) Brother or sister of the
spouse of the individual;
(d) Brother or sister of
either of the parents of the
individual;
(e) Any lineal ascendant or
descendent of the individual;
(f) Any lineal ascendant or
descendent of the spouse of
the individual;
(g) Spouse of the person
referred to in (b) to (f)
Hence, gold ring of Rs. 8,400 received by Mrs. Kapoor will not be charged to tax.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q44. During the previous year 2012-13, Mr. Kapoor gives return gifts of Rs. 84,252 to
his friends on the occasion of his marriage. Hence, such gifts of Rs. 84,252 will not be
charged to tax in the hands of friends of Mr. Kapoor since such gifts are received by
them on the occasion of the marriage of Mr. Kapoor.
(a) True (b) False
Correct answer: (b)
Justification of correct answer: Money/property received by the individual on the occasion
of his marriage is not charged to tax. Hence, return gifts of Rs. 84,252 given by Mr. Kapoor
on the occasion of his marriage will be taxed in the hands of friends of Mr. Kapoor since gifts
are not received by them on the occasion of their marriage.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q45. During the year 2012-13, Miss Khushi received on bullion of Rs. 52,200 from her
friends on the occasion of her elder sister’s marriage. In this case what will be the
amount of gift liable to tax?
(a) Rs. 52,200 (b) Rs. 50,000
(c) Rs. 2,200 (d) Nil
Correct answer: (a)
Justification of correct answer
Once the amount of gift exceeds Rs. 50,000 and if such gift is received on other than the
occasions prescribed under section 56(2), then entire amount of gift is charged to tax and,
hence, Rs. 52,200 will be liable to tax in the hands of Miss Khushi.
Thus, option (a) is the correct option.
Comment on incorrect answer : Option (a) is the correct option since it gives the correct
amount liable to tax. All the other options, viz., options (b), (c) and (d) giving incorrect
amounts are not correct.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Q46. During the year 2012-13, Mr. Kumar received shares of Rs. 84,000 on account of
death of his father. In this case nothing will be charged to tax under the head “Income
from other sources” since gift received on account of contemplation of death of the
payer is exempt from tax.
(a) True (b) False
Correct answer: (a)
Justification of correct answer
Money received on account of contemplation of death of the payer or donor is covered in the
prescribed exemptions and, hence, nothing will be charged to tax from Rs. 84,000 received
by Mr. Kumar on account of contemplation of death of his father.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q47. During the year 2012-13, Mr. Raja received painting of Rs. 52,252 from cousin of
his father. What will be the amount chargeable to tax under the head “Income from
other sources”?
(a) Rs. 2,252 (b) Rs. 50,000
(c) Rs. 52,252 (d) Nil
Correct answer: (c)
Justification of correct answer
Cousin of father of the individual does not fall under the definition of relative and, hence, the
whole amount of Rs. 52,252 will be charged to tax under the head of “Income from other
sources”.
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (a), (b) and (d) giving the incorrect
amount liable to tax are not correct.
Q48. During the year 2012-13, Miss Khushali received gold jewellery of Rs. 52,848 (fair
market value of such jewellery is Rs. 51,000) from Mr. Kumar who is elder brother of
her grandfather. Hence, nothing will be charged to tax in the hands of Miss Khushali
since elder brother of grandfather falls under the definition of relative.
(a) True (b) False
Correct answer: (b)
Justification of correct answer
Elder brother of grandfather of the individual is not covered under the definition of a relative
and, hence, the whole amount of gold jewellery of Rs. 52,848 will be charged to tax under the
head “Income from other sources” since the fair market value of the jewellery exceeds Rs.
52,848.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q49. During the year 2012-13, Mr. Raja received a gift of mobile phone from his
employer (mobile was purchased by his employer for Rs. 8,400). What will be the
amount chargeable to tax under the head “Income from other sources”?
(As amended by Finance Act, 2013)source : www.trpscheme.com
(a) Rs. 8,400 (b) Rs. 5,000
(c) Rs. 3,400 (d) Nil
Correct answer: (d)
Justification of correct answer:
Nothing will be charged to tax under the head “Income from other sources” since it is taxable
under the head “Salaries”.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (a), (b) and (c) giving the incorrect
amount liable to tax are not correct.
Q50. On 12-12-2012, Mr. Raja received a gift of residential building (stamp duty value
is Rs. 44,00,000) from elder brother of his father-in-law. What will be the amount
chargeable to tax under the head “Income from other sources”?
(a) Rs. 44,00,000 (b) Rs. 43,50,000
(c) Rs. 50,000 (d) Nil
Correct answer: (a)
Justification of correct answer:
If any immovable property is received without any consideration by an individual or HUF on
or after October 1, 2009 and the stamp duty value exceeds Rs. 50,000 then stamp duty value
will be chargeable to tax. Hence, Rs. 44,00,000 will be chargeable to tax in the hands of Mr.
Raja since brother of father-in-law does not fall under the definition of a relative and stamp
duty value also exceeds Rs. 50,000.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (b), (c) and (d) giving the incorrect
amount liable to tax are not correct.
Q51. On 23-3-2013, Mr. Kapoor purchased a plot of land from his friend for Rs.
8,52,000 (stamp duty value is Rs. 15,00,000). Hence, Rs. 6,48,000 (i.e., Rs. 15,00,000 – Rs.
8,52,000) will be charged to tax under the head “Income from other sources”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
If any immovable property is received without any consideration by an individual or HUF on
or after October 1, 2009 and the stamp duty value exceeds Rs. 50,000 then stamp duty value
will be chargeable to tax. If, however, an immovable property is acquired for a consideration
which is less than stamp duty value then nothing will be taxable in the hands of recipient,
even though the difference between stamp duty and consideration paid/payable exceeds Rs.
50,000. Hence, nothing will be charged to tax in the hands of Mr. Kapoor. Thus, the
statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q52. During the previous year 2012-13, Mr. Soham received a gift of plot of land under
the will of a person known to him. However, he is not a relative of Mr. Soham. The
(As amended by Finance Act, 2013)source : www.trpscheme.com
stamp duty value of such plot is Rs. 25,52,000. Hence, Rs. 25,52,000 will be charged to
tax in the hands of Mr. Soham.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
Money/property received by way of will/inheritance is specifically excluded from the
income-tax. Hence, nothing will be taxed in the hands of Mr. Soham in respect of plot of land
received under the will of person known to him, even though he is not a relative of Mr.
Soham.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q53. During the previous year 2012-13, Mr. Kapoor received a gift of wrist watch of Rs.
8,400 (fair market value is Rs. 10,000) from his friend. What will be the amount
chargeable to tax in the hands of Mr. Kapoor while computing “Income from other
sources”?
(a) Nil (b) Rs. 8,400
(c) Rs. 10,000 (d) Rs. 1,600
Correct answer: (a)
Justification of correct answer:
Wrist watch is not “property” for the purpose of section 56(2)(vii). Hence, nothing will be
charged to tax in the hands of Mr. Kapoor in respect of wrist watch of Rs. 8,400 received
from his friend.
Thus, option (a) is the correct option.
Comment on incorrect answer: Option (a) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (b), (c) and (d) giving incorrect amount
are not correct.
Q54. As per the provisions of section 56(2), if any property (i.e., whether movable or
immovable) is purchased for inadequate consideration which is less than the aggregate
fair market value/stamp duty value of the property or properties by an amount
exceeding Rs. 50,000 then the difference will be charged to tax under the head “Income
from other sources”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per the provisions of section 56(2), if any movable property is purchased for inadequate
consideration which is less than the aggregate fair market value of the property or properties
by an amount exceeding Rs. 50,000 then the difference between aggregate fair market value
and the consideration paid/payable will be charged to tax under the head “Income from other
sources”.
However, in case of immovable property acquired for inadequate consideration which is less
than stamp duty value, nothing will be charged to tax, even though the difference between
stamp duty value and the consideration paid/payable is more than Rs. 50,000.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q55. On 12-12-2012, Mr. Kumar received a gift of residential building (stamp duty
value is Rs. 25,52,000) from SM Corporation, a partnership firm whose partners are
father and grandfather of Mr. Kumar. What will be the amount chargeable to tax in the
hands of Mr. Kumar while computing income chargeable to tax under the head
“Income from other sources”?
(a) Rs. 50,000 (b) Rs. 25,02,000
(c) Rs. 25,52,000 (d) Nil
Correct answer: (c)
Justification of correct answer:
Partnership firm is not a “relative” of an individual, even though relatives of an individual are
partners of a firm. Hence, stamp duty of Rs. 25,52,000 will be charged to tax in the hands of
Mr. Kumar while computing income chargeable to tax under the head “Income from other
sources”.
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (a), (b) and (d) giving the incorrect
amount are not correct.
Q56. On April, 2012, Mr. Soham held 8% debentures (non-listed) of SM Ltd. of Rs.
52,000. He received interest of Rs. 3,744 (net of tax deducted at source @ 10%). What
will be the amount chargeable to tax in the hands of Mr. Soham while computing
income chargeable to tax under the head “Income from other sources”?
(a) Rs. 3,744 (b) Rs. 4,160
(c) Rs. 52,000 (d) Nil
Correct answer: (b)
Justification of correct answer:
Even though Mr. Soham received net interest of Rs. 3,744 (i.e., Rs. 4,160 – 10% of Rs.
4,160), gross amount of Rs. 4,160 will be charged to tax in the hands of Mr. Soham.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (a), (c) and (d) giving the incorrect
amount are not correct.
Q57. On 23-3-2013, Mr. Kumar purchased 840 shares of SM Ltd. from his friend
(outside the stock exchange) at Rs. 100 per share. The market quotation in BSE and
NSE on the date of purchase was Rs. 250 and Rs. 280 respectively. What will be the
amount liable to tax in the hands of Mr. Kumar while computing income chargeable to
tax under the head “Income from other sources”?
(a) Rs. 2,10,000 (b) Rs. 2,35,200
(c) Rs. 1,26,000 (d) Rs. 1,51,200
Correct answer: (c)
Justification of correct answer:
If a movable property is acquired for inadequate consideration which is less than the
aggregate fair market value of the property or properties by an amount exceeding Rs. 50,000
(As amended by Finance Act, 2013)source : www.trpscheme.com
then the difference between aggregate fair market value and the consideration will be charged
to tax under the head “Income from other sources”.
Hence, in this case Rs. 1,26,000 [i.e., (Rs. 250- Rs. 100) * 840 shares] will be charged to tax
in the hands of Mr. Kumar (Market quotation of BSE will be considered).
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (a), (b) and (d) giving the incorrect
amount are not correct.
Q58. During the previous year 2012-13, Mrs. Kapoor received gift of diamonds from
cousin of her mother-in-law. The fair market value was Rs. 1,25,200. Hence, nothing
will be charged to tax in the hands of Mrs. Kapoor while computing income chargeable
to tax under the head “Income from other sources” since cousin of mother-in-law falls
under the definition of relative.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
Money received by an individual from his relatives is not charged to tax. The term relative in
this context will cover:
(a) Spouse of the
individual;
(b) Brother or sister of
the individual;
(c) Brother or sister of the
spouse of the individual;
(d) Brother or sister of
either of the parents of the
individual;
(e) Any lineal ascendant or
descendent of the individual;
(f) Any lineal ascendant or
descendent of the spouse of
the individual;
(g) Spouse of the person
referred to in (b) to (f)
Hence, cousin of mother-in-law does not fall under the definition of relative; the fair market
value of Rs. 1,25,200 will be charged to tax in the hands of Mrs. Kapoor.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q59. During the previous year 2012-13, Miss Khushi received gift of painting (fair
market value is Rs. 48,000) from SM Ltd. Father of Miss Khushi holds 52% shares in
SM Ltd. In this case nothing will be charged to tax in the hands of Miss Khushi while
computing income chargeable to tax under the head “Income from other sources”. (She
has not received any other gift during the previous year 2012-13).
(a) True (b) False
Correct answer: (a)
Justification of correct answer:
Money received by an individual from his relatives is not charged to tax. The term relative in
this context will cover:
(As amended by Finance Act, 2013)source : www.trpscheme.com
(a) Spouse of the
individual;
(b) Brother or sister of
the individual;
(c) Brother or sister of the
spouse of the individual;
(d) Brother or sister of
either of the parents of the
individual;
(e) Any lineal ascendant or
descendent of the individual;
(f) Any lineal ascendant or
descendent of the spouse of
the individual;
(g) Spouse of the person
referred to in (b) to (f)
Hence, company will not be treated as relative of Miss Khushi. However, in this case nothing
will be charged to tax under the head “Income from other sources” since the aggregate fair
market value of gift does not exceed Rs. 50,000.
Thus, the statement given in the question is true and, hence, option (a) is the correct option.
Comment on incorrect answer: The statement given in the question is true. Hence, option
(b) is not the correct option.
Q60. During the previous year 2012-13, Mrs. Sharma received gift of plot of land
(stamp duty value is Rs. 32,848) from cousin of Mr. Sharma. What will be the amount
chargeable to tax in the hands of Mrs. Sharma while computing income chargeable to
tax under the head “Income from other sources”?
(a) Rs. 48,000 (b) Rs. 50,000
(c) (a) or (b) as per the choice of Assessing Officer (d) Nil
Correct answer: (d)
Justification of correct answer:
Money received by an individual from his relatives is not charged to tax. The term relative in
this context will cover:
(a) Spouse of the
individual;
(b) Brother or sister of
the individual;
(c) Brother or sister of the
spouse of the individual;
(d) Brother or sister of
either of the parents of the
individual;
(e) Any lineal ascendant or
descendent of the individual;
(f) Any lineal ascendant or
descendent of the spouse of
the individual;
(g) Spouse of the person
referred to in (b) to (f)
Hence, cousin of spouse of an individual does not fall under the definition of relative.
However, in this case nothing will be charged to tax in the hands of Mrs. Sharma since the
stamp duty value does not exceed Rs. 50,000.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (a), (b) and (c) giving the incorrect
amount are not correct.
Q61. During the previous year 2012-13, Mr. Raja received gift of residential house
situated in Jammu from his friend on the occasion of his birthday (stamp duty value is
Rs. 1,52,000). Hence, nothing will be charged to tax in the hands of Mr. Raja while
(As amended by Finance Act, 2013)source : www.trpscheme.com
computing income under the head “Income from other sources” since the house is
situated in Jammu.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
Nowhere it has been mentioned in section 56(2) that if any immovable property received in
gift by an individual or HUF is situated in Jammu, then nothing will be charged to tax.
Hence, in this case stamp duty value of Rs. 1,52,000 will be charged to tax in the hands of
Mr. Raja while computing income chargeable to tax under the head “Income from other
sources”.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q62. During the previous year 2012-13, Mr. Kumar purchased a plot of land worth Rs.
8,84,000. The stamp duty value of the plot is Rs. 10,00,000. What will be the amount
chargeable to tax in the hands of Mr. Kumar while computing his income chargeable to
tax under the head “Income from other sources”?
(a) Rs. 8,84,000 (b) Rs. 10,00,000
(c) Rs. 1,16,000 (d) Nil
Correct answer: (d)
Justification of correct answer:
As per the provisions of section 56(2), if any immovable property is acquired for inadequate
consideration which is less than stamp duty value then nothing will be charged to tax, even
though the difference between stamp duty value and the consideration paid/payable is more
than Rs. 50,000.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (a), (b) and (c) giving the incorrect
amount are not correct.
Q63. During the previous year 2012-13, Mr. Soham (a dealer in properties) received gift
of house property for his business purpose from his friend. Stamp duty value of such
house property is Rs. 25,52,000. Hence, stamp duty value of Rs. 25,52,000 will be
taxable in the hands of Mr. Soham while computing income chargeable to tax under the
head “Income from other sources”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
Section 56(2)(vii) is applicable only when an immovable property is received by an
individual or HUF as a capital asset. Hence, nothing will be taxable under the head “Income
from other sources” since house property is received by Mr. Soham as stock-in-trade.
Thus, the statement given in the question is false and hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
(As amended by Finance Act, 2013)source : www.trpscheme.com
Q64. During the previous year 2012-13, Mr. Shan received gift of plot of land (being
agricultural land) situated in rural area. Stamp duty value of such agricultural plot is
Rs. 8,84,000. What will be the amount chargeable to tax in the hands of Mr. Shan while
computing income chargeable to tax under the head “Income from other sources”?
(a) Rs. 8,84,000 (b) Rs. 8,34,000
(c) Rs. 1,10,004 (d) Nil
Correct answer: (d)
Justification of correct answer:
Section 56(2)(vii) is applicable only if “capital asset” is received by gift and rural agricultural
land is not a “capital asset” as per section 2(14). Hence, nothing will be taxable in the hands
of Mr. Shan while computing income under the head “Income from other sources”.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (a), (b) and (c) giving the incorrect
amount are not correct.
Q65. During the previous year 2012-13, Mr. Raja purchased painting of Gandhiji from
a registered dealer (under sales tax/VAT) at invoice value of Rs. 84,000. The painting
can be easily sold in the market for Rs. 1,00,252. What will be the amount chargeable to
tax in the hands of Mr. Raja while computing income chargeable to tax under the head
“Income from other sources”?
(a) Rs. 84,000 (b) Rs. 1,00,252
(c) Rs. 16,252 (d) Nil
Correct answer: (d)
Justification of correct answer:
If any movable property is purchased from a dealer registered under VAT/sales tax, then
“invoice value” will be taken as fair market value of the property for the purpose of section
56(2)(vii) and nothing will be taxed under section 56(2)(vii) if a property is purchased at
“invoice value”. Hence, in this case nothing will be taxable under section 56(2)(vii) in the
hands of Mr. Raja, even though the painting can be easily sold in the market for Rs. 1,00,252
since he has purchased the painting at “invoice value” of Rs. 84,000.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (a), (b) and (c) giving the incorrect
amount are not correct.
Q66. During the previous year 2012-13, Mr. Raja purchased painting of Gandhiji from
a person who is not a registered dealer (under sales tax/VAT) at invoice value of Rs.
84,000. The fair market value is Rs. 1,00,252. What will be the amount chargeable to tax
in the hands of Mr. Raja while computing income chargeable to tax under the head
“Income from other sources”?
(a) Rs. 84,000 (b) Rs. 1,00,252
(c) Rs. 16,252 (d) Nil
Correct answer: (c)
Justification of correct answer:
(As amended by Finance Act, 2013)source : www.trpscheme.com
If a movable property is purchased from a person who is not a registered dealer of VAT/sales
tax, then the difference between “invoice value” and the fair market value will be taxable
under section 56(2)(vii). Hence, in this case Rs. 16,252 (i.e., Rs. 1,00,252 – Rs. 84,000) will
be taxable in the hands of Mr. Raja under section 56(2)(vii).
Thus, option (c) is the correct option.
Comment on incorrect answer: Option (c) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (a), (b) and (d) giving the incorrect
amount are not correct.
Q67. As per the provisions of section 57(iv), 50% of compensation or enhanced
compensation is deductible while computing income chargeable to tax under the head
“Income from other sources”.
(a) True (b) False
Correct answer: (b)
Justification of correct answer:
As per the provisions of section 57(iv), income by way of interest received on compensation
or enhanced compensation and not the income by way of compensation or enhanced
compensation shall be charged to tax under the head “Income from other sources”. Moreover,
50% of such interest received on compensation or enhanced compensation is deductible while
computing income chargeable to tax under the head “Income from other sources”.
Thus, the statement given in the question is false and, hence, option (b) is the correct option.
Comment on incorrect answer: The statement given in the question is false. Hence, option
(a) is not the correct option.
Q68. During the previous year 2012-13, Mr. Raja received enhanced compensation of
Rs. 84,252 from the Government for compulsory acquisition of industrial land. What
will be the amount chargeable to tax under the head “Income from other sources”?
(a) Rs. 84,252 (b) Rs. 42,126
(c) Rs. 75,827 (d) Nil
Correct answer: (d)
Justification of correct answer:
As per the provisions of section 57(iv), income by way of interest received on compensation
or enhanced compensation and not the income by way of compensation or enhanced
compensation shall be charged to tax under the head “Income from other sources”. Hence, in
this case nothing will be charged to tax in the hands of Mr. Raja while computing income
under the head “Income from other sources” in respect of enhanced compensation received of
Rs. 84,252.
Thus, option (d) is the correct option.
Comment on incorrect answer: Option (d) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (a), (b) and (c) giving the incorrect
amount are not correct.
Q69. During the previous year 2012-13, Mr. Raja received interest on enhanced
compensation of Rs. 84,252 from the Government for compulsory acquisition of
industrial land. What will be the amount chargeable to tax under the head “Income
from other sources”?
(a) Rs. 84,252 (b) Rs. 42,126
(As amended by Finance Act, 2013)source : www.trpscheme.com
(c) Rs. 58,976 (d) Nil
Correct answer: (b)
Justification of correct answer:
As per the provisions of section 57(iv), income by way of interest received on compensation
or enhanced compensation and not the income by way of compensation or enhanced
compensation shall be charged to tax under the head “Income from other sources”. Moreover,
50% of such interest received on compensation or enhanced compensation is deductible while
computing income chargeable to tax under the head “Income from other sources”.
Hence, in this case, Rs. 42,126 (i.e., 84,252 – 50%) will be taxable in the hands of Mr. Raja
under the head “Income from other sources”.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
amount liable to tax. The other options, viz., options (a), (c) and (d) giving the incorrect
amount are not correct.
Q70. Whether deduction under sections 80C to 80U is permissible while computing
income chargeable to tax under the head “Income from other sources”?
(a) Yes (b) No
Correct answer: (b)
Justification of correct answer:
No deduction is permissible under sections 80C to 80U while computing income chargeable
to tax under the head “Income from other sources”.
Thus, option (b) is the correct option.
Comment on incorrect answer: Option (b) is the correct option since it gives the correct
provisions. The other option, viz., option (a) giving the incorrect provisions is not correct.
(As amended by Finance Act, 2013)source : www.trpscheme.com