Income under the head other source

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“ Income fm Other Sources”

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Income fm Other Sources

CHARGEABILITY

As per sec. 56(1) , any income is taxable U/H “ IOS” i f the fo l lowing condi t ions are

sat is f ied:

i . There must be an income.

i i . Such income is not exempted u/s 10 to 13 -A.

i i i . That income is ne i ther sa lary income, nor renta l income fm house property, nor income fm bus iness or p rofess ion, nor capi ta l ga in.

01. Sec. 56(2) lays down the fo l lowing l is t o f incomes, which are spec i f ica l ly

taxable under th is head:

i . Dividend other than d iv idend refer red to in sect ion 115-0

DISCUSSED IN DETAIL IN THE CH APTER “DIVIDEND”

i i . Wining fm lo t ter ies , c rossword puzzles, races ( inc lud ing horse races) , card games, te levis ion game shows & other games, gambl ing or bet t ing of any form or natu re.

i i i . Sum received by employer as Providen t Fund contr ibut ion fm employees i f the income is not taxable as bus iness income.

iv . In terest on secur i t ies i f he ld as an investment .

v. Income fm le t t ing of machinery, p lan t or fu rn i ture (when such le t t ing is not inc identa l to bus iness) .

vi . Let t ing of machinery, p lant or furn i ture a long wi th the bui ld ing, where such le t t ing of bu i ld ing is inseparable fm the le t t ing of machinery, p lant or furn i ture, i f not charged to tax U/H “B&P”

vi i . Any sum of money aggregate of which exceeds Rs. 50,000 received without considerat ion by an individual or a HUF from any person (s) , subject to certain exception [sec 56(2) (vi i )

vi i i . Any sum of money aggregate value of which exceeds Rs. 50 ,000 or immovable propert y or property ] other than immovable property received by an individual or HUF w ithout considerat ion or at a pr ice lower than stamp duty value or FMV [sec 56(2)(vi i ) ]

ix . Income are way of interest received on compensation or on enhanced compensation re ferred to in section 145A(b)

x. Sum recd. under Keyman Insurance Policy, i f not charged t o tax U/H “B&P”.

DISCUSSED IN DETAIL IN THE CH APTER “ INCOME”

02. Apart fm the above , by vi r tue of sec. 56(1 ) , fo l lowing incomes are a lso chargeable under th is head:

i . Agr icu l ture income fm a p lace outs ide Ind ia.

i i . Fami ly pens ion received by fami l y members o f d eceased employee.

i i i . Income fm sub le t t ing.

iv . In terest on bank o r post o f f ice depos i ts or loans.

v. Director ’s s i t t ing fee.

vi . Remunerat ion received for evaluat ion of answer scr ip ts fm person other than employer .

vi i . Rent fm a vacant land.

Points to be remembered

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vi i i . Income fm undisc losed source.

ix . In terest on Income tax refund. However, income tax refund is not taxable .

x. Casual income.

xi . Remunerat ion received by the member of par l iament

xi i . Income received af ter d iscont inuat ion of bus iness

xi i i . Insurance commiss ion

xiv . Mining rent and royal t ies

xv. Director ’s commiss ion fo r underwr i t ing shares of new company

xvi . Annui ty payable to the lender of a t rade mark

03. Income is chargeable in accordance with method of accounting fol lowed by assessee {Sec. 145}

A. Dividend has been charged as per the method s pec i f ied in sec. 8 .


Dividend {Sec. 2(22) read with sec. 56(1)}


Winning fm lotteries, crossword puzzles, horse race and

card games etc. {Sec. 56(2)(ib)}

Winning o f the fo l lowing nature are taxable under th is head:

i . Lot ter ies ;

i i . crossword puzzles;

i i i . races inc lud ing horse races;

iv. gambl ing & bet t ing of any natu re;

v. card games, game show or ente r ta inment program on te levis ion or e lect ron ic mode and any other game of any sor t in which people compete to win p r izes o r any other s imi lar game;

01. No deduct ion can be c la imed fm such income even i f such expend i ture is incurred exc lus ive ly & whol ly fo r earn ing such income.

02. No deduct ion u/s 80.

03. Winnings are taxable at the f la t ra te of 30% in case of a l l the assessee as per sec. 115-BB.

04. TDS shal l be deducted @ 30% i f the amount o f winn ing exceeds Rs. 5 ,000 in case of winn ings fm horserace whi le Rs 10,000 in case of o ther .

Points to be remember ed

KEY POINTS

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Interest on securities

“Interest on securi t ies” means:

i . In terest on any secur i ty o f the Centra l / State Govt . ;

i i . In terest on debentures o r o ther secur i t ies for money issued by or on behal f o f a loca l author i t y o r a company o r a corporat ion establ ished by Centra l , S tate or Provinc ia l Act .

01. In terest on secur i t ies which are held as s tock - in- t rade shal l be taxable U/H “P&G fm B/P”.

02. In terest on secur i t ies does not accrue every day or accord ing to the per iod of ho ld ing. Genera l l y, i t becomes due on due date spec i f ied for secur i t ies .

03. In terest on spec i f ied secur i t ies is exempt fm tax u/s 10(15) .

04. Any reasonable sum paid by way of commiss ion or remunerat ion for rea l is ing such income on behal f o f the assessee shal l be deducted fm in terest income.

05. Rate of TDS on in terest on l is ted debentures is 10% whi le in case of non - l is ted debentures is 10%.

Interest exempt u/s 10(15):

12-Year National Savings Annual Certificate National Defence Gold Bonds, 1980 Special Bearer Bonds, 1991

Treasury Savings Deposit Certificate (10 Years) Post Office Cash Certificates (5 Years) National Plan Certificates (10 Years) National Plan Savings Certificates (12 Years) P.O. National Plan Certificates (12 Years / 7 Years) P.O. Savings Bank Account

P.O. Cumulative Time Deposit Account (15 Years) Fixed Deposit Scheme governed by the Government Savings certificate (Fixed Deposit) Rules, 1968. Fixed Deposit Scheme governed by the Post Office (Fixed Deposit) Rules, 1981. Public Account in P.O. (upto Rs.5,000) Gold Deposit Bonds, 1999xv. Bonds issued by local authority and specified by the Central

Government. Interest on notified bonds issued by local authority or by state pooled finance entity


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Receipt without considerations {Sec. 56(2)(v ii)&(viia) }

Applicable to:

Ind iv idual and HUF

The fo l lowing three k ind of g i f ts received by an ind iv idual or HUF f rom an unre lated person (s) shal l be taxable u/s 56(2) (v i i )

A. Gif t in money

B. Gif t o f immovable property received wi thout cons iderat ion or acqui red for inadequate cons iderat ion (w .e. f 1 .04.09)

C. Gif t o f any property , o ther than immovable p roperty whether received wi thout cons idera t ion or acqui red for inadequate cons iderat ion

Conditions:

A. Gift in money

During the PY he or i t has received any sum of money exceeding Rs 50,000/ - ( in aggregate ) wi thout cons iderat ion [only appl icable i f gi f t received before 1 -10-09]

B. Gift of immovable property

( i) Without consideration – where any immovable property is received by an

ind iv idual or HUF f rom any person wi thout cons iderat ion , the s tamp duty va lue o f which exceeds Rs. 50,000 , the s tamp duty va lue of such property shal l be taxable in the hands of the rec ip ient . [s ing le t ransact ion ]

( i i ) Acquired for inadequate considerat ion – W here such immovable property

is acqui red by an ind iv idual or HUF for a cons iderat i on which is less than the s tamp duty va lue of the property , by an amount exceeding Rs. 50 ,000 , the excess o f s tamp duty va lue of such property over such cons iderat ion shal l be taxable in the hands of the rec ip ien t . [ s ing le t ransact ion ] DELETED BY FINANCE BILL 2010

C. Gift of property other than immovable property

( i) Without consideration – W here any property o ther than immovable property is

received by an ind iv idua l or HUF , the aggregate fa i r market va lue of which exceeds Rs. 50,000 , the whole of t he aggregate ,FMV of such property shal l be taxable in the hands of the rec ip ient . [a l l t ransact ion ]

( i i ) Acquired for the inadequate consideration – where such p roperty o ther

than immovable property is acqui red for a cons iderat ion which is less than the aggregate FMV of such property as exceeds such cons iderat ion shal l be taxable in the hands of the rec ip ient . [a l l t ransact ion]

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Except ions:

i . Any sum o f money which is received by way of cons iderat ion;

i i . Any sum o f money which is received fm any re la t iv e;

“Relat ives” inc ludes:

a. Spouse of the ind iv idual ;

b. Brother or s is ter o f the ind iv idual ;

c. Brother or s is ter o f the spouse of the ind iv idual ;

d. Brother or s is ter o f e i ther o f the parents of the ind iv idual ;

e. Any l ineal ascendant or descendant o f the ind iv idual ;

f . Any l ineal ascendant or descendant o f the spouse of the ind iv idual ;

g. Spouse of the person referred to in (b) to (c ) .

i i i . Any sum of money wh ich is received on the occas ion of marr iage of the ind iv idual ;

iv. Any sum o f money which is received under wi l l or by way of inher i tance;

v. Any sum o f money which is received in contemplat ion of the dea th of the payer ;

vi . Any sum o f money not exceeding Rs 50,000/ - ;

vi i . Any sum of money rece ived f rom any loca l author i ty u /s 10(20) ; any fund or foundat ion or un ivers i ty or o ther educat ion al ins t i tu te o r any t rust covered u/s 10(23C) or any t rust ins t i tu te reg is tered u/s 12AA

Property means – Immovable proper ty be ing land or bu i ld ing or both , Shares and

secur i t ies , Jewel lery, archaeologica l co l lec t ion , Draw ing ,Paint ing ,Sculptures or any work of a r t and Bul l ion w.ef . 1 -06-2010


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Different cases Tax treatment

Case1- X receive a cash g i f t o f Rs. 50 ,000 on September 30,2011 f rom h is f r iend A. He receives ano ther cash g i f t o f Rs. 50,000 f rom h is f r iend B on Oct 1 ,2011.

Case 2- X receives the fo l lowing house propert ies f rom h is f r iends wi thout any cons iderat ion

Place

where

property

situated

Date of

gift

Stamp

duty

value

Delh i 30-09-2011 Rs.20 crore

Patna 1-10-2011 Rs.50,000

Chennai 10-10-2011 Rs. 2 .3 lakh

Case 3- Z purchases gold for Rs. 5 lakh (F.M.V ;Rs. 5 .5 lakh) on Oct 10,201 1.He fur ther purchases a paint ing for Rs. 20 lakh (F.M.V 20.5 Lakh)on Dec 1,2011

Case 4- suppose in the aforesaid cases, the rec ip ient is on ly one person (P)

AMOUNT TAXABLE IN THE HANDS OF d WILL BE Rs.

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Receipts of shares by a firm or a closely held company

56(2) (VIIa)

Clause (v i ia) has been inser ted in sect ion 56(2)(v i ia) w.e. f 1 -06-2010 .This c lause is appl icable i f the fo l lowing cond i t ion sat is f ied

a . Rec ip ient is a f i rm or c losely he ld company

b . The assets ( which is received) is in the form of shares in a c losely he ld company

c . These shares are received f rom any person on o r a f ter 1 -06-2010

d. Such share are received wi thout cons idera t ion or for an adequate cons iderat ion

e . Such shares are not received by shareholder in a scheme of amalgamat ion or demerger

I f these condi t ion sat is f ied , then va lue of such shares wi l l be taxab le I the hands of rec ip ient . ( f i rm or c losely he ld co. )

Different situat ion Taxabi lity in the hands of recipient

Shares are received wi thout cons iderat ion and aggregate FMV of these shares received dur ing the PY does not exceeds Rs. 50,000

Noth ing is taxable

Shares are received wi thout cons iderat ion and aggregate FMV of these shares received dur ing the PY

Aggregate FMV wi l l taxable in the hands of rec ip ient

Shares are received for a cons iderat ion which is less than FMV and the aggregate d i f ference does not exceeds Rs. 50,000

Noth ing is taxable

Shares are received for a cons iderat ion which is less than FMV and the aggregate d i f ference exceeds Rs. 50,000

Aggregate FMV minus aggregate cons iderat ion wi l l be taxable

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AMOUNT NOT DEDUCTIBLE

As per sec. 58 , the fo l lowing amounts shal l not be deduct ib le in comput in g the income chargeable under the head " Income f rom other sources" :

i . Personal expenses of the assessee;

i i . Weal th Tax;

i i i . In terest or sa lary pa id outs ide Ind ia on which tax has not been paid or deducted at source;

iv. Any amount pa id to a person spec i f ied u/s 40 -A (payment to re la t i ve in excess of requi rement ) .

ALLOWABLE DEDUCTIONS

U/s 57 , the income chargeable U/H “ Income fm Other Sources” shal l be computed af ter making the fo l lowing deduct ions:

i . In respect o f any sum col lec ted fm employees towards the W el fare Fund contr ibut ion, deduct ion shal l be a l lowed to the extent the amount is remi t ted wi th in the re levant due date.

A. “Due date” is the da te by which the assessee is requi red as

employer to credi t such contr ibut ion to the employees accou nt in the re levan t fund under the provis ion of any law or terms of contract o f service or o therwise.

DISCUSSED IN DETAIL IN “P&G fm B /P: COMPUTATION”

i i . In case of income fm machinery, p lant and furn i ture le t on h i re , the fo l lowing deduct ions are permiss ib le :

a. Current repai rs to machinery, p lant and furn i tu re

b. Insurance premium paid for machinery, p lant or furn i ture

c. Deprec iat ion and unabsorbed deprec iat ion as per sec. 32.

i i i . In case of income fm machinery, p lant and furn i ture a long wi th bu i ld ing le t on h i re , the fo l lowing deduc t ions are permiss ib le :

a. I f the assessee owns the bui ld ing, on ly current repai rs is deducted otherwise both current as wel l as capi ta l repai rs are deduct ib le .

b. Rent , ra tes and taxes pa id by the assessee for bu i ld ing.

c. Current repai rs to machinery, p lant and furn i tu re

d. Insurance premium paid for machinery, p lant or furn i ture o r bu i ld ing.

e. Deprec iat ion and unabsorbed deprec iat ion as per sec. 32.

KEY POINTS

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iv. Deduct ion of 1/3 rd of such income or Rs 15 ,000/ - whichever is lower, is a l lowed

fm the income in the na ture of fami l y fund .

A. “Family Pension” means a regular month ly amount payable by the

employer to a person belonging to the fami l y in the even t o f h is death.

B. Rel ief u/ 89 i s a lso avai lab le on fami ly pens ion.

v. Any other expendi tu re not be ing in the nature of capi ta l expendi ture, incurred whol ly and exc lus ive ly for earn ing such income.

KEY POINTS

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a. X, a res ident ind iv idual , submi ts the fo l lowing par t icu lars of h is income for the

previous year ending March 31, 2012: Dividend-

Name of payer Company

Is i t d iv idend under sect ion 2(22)(e)

Date of dec larat ion of d iv idend

Amount o f tax deducted under sect ion 194 Rs.

Net amount pa id to X Rs.

In terest pa id by X on capi ta l borrowed to invest in shares Rs.

A Ltd. , a fo re ign Co. B Ltd. , a fo re ign Co. C Ltd, on Ind ian Co. D Ltd. on Ind ian Co.

No No No yes

Ju ly 15, 2011 Apr i l 1 , 2011 Oct 31,2011 May 1, 2011

Ni l Ni l Ni l 4 ,080

70,000 43,000 2 ,500 15,920

3,000 50,000 2 ,000 11,000

Rent f rom le t t ing a fac to ry a long wi th p lant and machinery ( le t t ing ou t o f fac tory cannot be separated f rom le t t ing out o f p lant and machinery) : Rs. 30,600. Col lec t ion charges in respect o f rent : Rs. 400. F i re insurance premium in respect o f bu i ld ing: Rs. 600. F i re Insurance premium in respect o f p lant and machinery :Rs. 750 . Repai rs in respect o f bu i ld ing: Rs. 4 ,600. Deprec ia t ion of bu i ld ing , p lant and machinery: Rs. 18,600. W innings f rom lo t tery on December 1, 2010 : net amount : Rs. 69,400; tax deducted at source: Rs. 30,600. W innings f rom card games: Rs. 13,500 (gross) . In terest on secur i t ies issued by the Government o f Japan: Rs. 30,670 Dur ing the previous year , X has received the fo l lowing g i f ts -

Gi f t f rom whom Data of g i f t Amount Rs.

Gi f t f rom a f r iend Gi f t f rom a f r iend Gi f t f rom brother Gi f t f rom grandfa ther received by wi l l Gi f t f rom f r iends at the t ime of marr iage of X Gi f t f rom a f r iend

August 20, 2011 September 10, 2011 September 15, 2011 september16, 2011 September 18, 2011 November 20, 2011

1,00,000 60,000 90,000 1,40,000 1,35,000 25,000

Determine the income chargeable under the head “ Income f rom other sources” fo r the

Assessment Year 2012-13 .

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Dividends

“Dividend” hasn’ t been def ined under I .T.Act . In layman language, d iv idend refers to d is t r ibut ion o f prof i t .

Dividend is taxable U/H “ Income fm Other Sources ( IOS) ” u/s 56(2)( i ) .

“Interim Dividend” re fers to d iv idend paid by Di recto r pr ior to shareholders

approval a t any t ime dur ing the FY and upto the t ime of Annual Genera l Meet ing.

A. In ter im d iv idend can be paid on ly i f Ar t ic les of Assoc iat ion permi t the company to pay.

B. I t can be resc inded by the Board any t ime before the actual payment .

Company can pay d iv idend only out o f prof i ts , current or accumulated. Div idend can a lso be paid out o f money provided by the Government .

Dividend genera l l y be paid in cash or equiva lent to cash.

A. In I .T. Act , d is t r ibut ion of d iv idend in k ind may a lso be deemed as

d iv idend.

Dividend’s to be paid on ly to the reg is tered shareholders or to the i r order or to the i r bankers.

A. In case of jo in t ho lders , the d iv idend shal l be sent to the f i rs t name appear ing in the Regis te r o f Members to such address as the shareholders provided .

Preference shareholders en joy a prefe rent ia l r ight over the equi ty shareholders (ESH) in the mat ter o f d iv idend. They are ent i t led to receive d iv idend at the f i xed

rate before any d iv idend is pa id to equi ty shareholder .

A. I f company issues cumulat ive prefe rence share, the holders of such shares are ent i t led to receive a l l arrears of d iv idend in addi t ion to d iv idend fo r the current year be fore any d iv idend is pa id to equi ty share holder .

Dividend shal l be deemed to accrue o r ar ise in Ind ia, i f i t is dec lared by an Ind ian company.

Judicial Citat ion

☞ B.V.VENKATESAM CHETTY

The date of receipt o f d iv idend is re levant and not the date of dec la rat ion where cash method o f account ing is fo l lowed.

KEY POINTS

KEY POINTS

KEY POINTS

KEY POINTS

Fundamentals

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DEEMED DIVIDEND

Distribution of accumulated profit entailing release of co.

asset {Sec . 2(22)(a)}

Any d is t r ibu t ion by a company to i ts shareholder resul t ing in the re lease of a l l or any par t o f the assets of the company is deemed d iv iden d.

01. To the exten t to wh ich company possess accumulated prof i t , whether capi ta l ised or not .

02. Such accumulated prof i ts are d is t r ibu ted in cash or in k ind. W here the d is t r ibut ion is in k ind, market va lue of the asset (and not in the book va lue) on the date on which the shareholder becomes ent i t led to receive d iv idend , shal l be deemed d iv idend in the hands of shareholder .

Judicial Citat ion

☞ SHASHBALA NAVNITLAL

Issue of bonus share does not enta i l re lease of any assets o f the company as the assets s ides remains in tact .

Distribution of accumulated profits in the form of

debentures, debentures stock etc. {Sec. 2(22)(b)}

As per sec. 2 (22) (b) , any d is t r ibu t ion to i ts shareholder by a company of

i . debentures, debenture -s tock or depos i t -cer t i f icates wi th or wi thout in te rest to i ts (equi ty as wel l as pre ference shareholder ) ;

i i . bonus share to pre ference shareholder ;

is deemed d iv idend.

01. Under the afo resaid c i rcumstances, d is t r ibut ion amounts to d iv idend in the hands o f the rec ip ien t even i f there is no re lease of assets at the t ime of d is t r ibut ion.

Distribution of accumulated profit at the time of

liquidation {Sec. 2(22)(c) read with sec. 46}

Any d is t r ibut ion made to i ts equity shareholder on the l iqu idat ion of company is

deemed d iv idend.

01. To the extent to which such d is t r ibut ion is a t t r ibutable to the accumulated prof i t o f the company immediately before i ts l iquidation , whether capi ta l ised or not ;

02. Where the l iqu idat ion is consequent on the c ompulsory acquis i t ion of the undertak ing of the company by the Govt . or by any Corporat ion owned or contro l led by the Govt . under any law in force, the accumulated prof i t shal l not




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inc lude any prof i t o f the company pr ior to three consecut ive PY immediate ly preceding the PY in which such acquis i t ion takes p lace.

03. Impl icat ion of taxat ion o f Capi ta l Gain a t the t ime of l iqu idat ion.

DISCUSSED IN “C APITAL G AIN : UNTOUCHED ISSUES”

Distribution of accumulated profits on the reduction of

its capital {Sec. 2(22)(d)}

Any d is t r ibut ion by co. to i ts shareholder on a/c of reduct ion of share capi ta l is

deemed d iv idend.

01. To the exten t to wh ich company possess accumulated prof i t , whether capi ta l ised or not .

Distribution of accumulated profit by way of advance or loan {Sec. 2(22)(e)}

Any payment by a closely held company , o f any sum:

i . by way of loan o r advance to

a. a shareholder be ing the beneficial owner o f equi ty shares hold ing not

less than 10% vot ing power;

or

b. any concern in which such shareholder is a member or par tner and in which s /he has substant ial interest.

i i . to any person on behal f o f or for the ind iv idual benef i t o f such shareholder ;

is deemed d iv idend.

01. To the extent to which company possess accumulated prof i t . (Capi tal ised profi ts not included) .

02. “Closely held companies” is a company in wh ich publ ic are not substant ia l ly

in terested.

DISCUSSED IN “ INCOME TAX - J ARGON”

03. “Concern” means a HUF, f i rm, an AOP, BOI or a company.

04. A person shal l be deemed to have as “substantial interest” in a concern i f s /he is , a t any t ime dur ing the PY , benef ic ia l l y ent i t led to not less than 20% of the income of such concern. (20% o f vot ing power in case of a company) ;

ALSO DISCUSSED IN THE CH APTER “CLUBBINNG OF INCOME” / “P&G f m B/P - COMPUTATION” / “SAL AR Y” / “ ASSESSMENT OF TRUST”.

Relevant Chapter Relevant Sect ion

Clubbing o f Income 64(1) ( i i )

Sa lary 17(2)

P&G fm B/P - Computat ion 40-A (2 )



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05. I f the loan is g iven to a concern in which such shareholder has 20% shares in prof i t / vot ing power at any t ime dur ing the PY, BOTH the fo l lowing condi t ions are to be sat is f ied :

i . Shareholder should have 10% vot ing power in the c losely he ld company on the date when the loan i s g iven to the concern.

i i . Shareholder should be a member / par tner on the date loan is g iven to such concern.

06. Sec. 2(22)(e ) covers not on ly loan and advances to shareholder but any other payment on behal f o f o r for the ind iv idual benef i t o f shareholders .

For example: Payment of shareholder ’s persona l expenses, insurance premium etc .

07. Loan is deemed d iv idend, even i f re funded be fore the end o f PY, e i ther in fu l l or in par t .

08. Any advance or loan to a shareholder or the concern in which the shareholder has substant ia l in terest by a company wi l l not be t r eated as d iv idend :

i . i f the loan or advance i s g iven dur ing the normal course of i ts bus iness

provided the lending of money is substant ia l par t o f the bus iness o f the company;

i i . Any d iv idend paid by the company which is set off by the company against

the whole or any per t o f the loan which has been deemed as d iv ided u/s 2(22)(e) ;

As per sec. 2 (22) , d iv idend shal l not inc ludes:

i . Any payment made by a company on purchase of i ts own shares fm a shareholder in accordance wi th the provi s ion of sec. 77 -A of Companies Act , 1956.

A. Such buy back of shares at t racts capi ta l ga in tax in the hands of the shareholder .

DISCUSSED IN “CAPITAL G AIN: UNTOUCHED ISSUES”

i i . Any d is t r ibut ion of assets pursuant to a demerger by the resul t ing co. to the shareholders of the demerged co. (whether or not there is reduct ion o f capi ta l in the demerged company).

i i i . Any d is t r ibu t ion made in accordance wi th sec. 2(22)(c) / (d) in respect o f preference shareholder i ssued for fu l l cash cons iderat ion as they aren’ t ent i t led to par t ic ipate in surp lus assets .

CAUTION

KEY POINTS

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Accumulated Profit:

I f reserve is created out o f the p rof i t o f the company, then i t fo rms par t o f the accumulated prof i t .

I t includes the credi t ba lance of P&L A/c , genera l reserves, tax f ree income i .e .

agr icu l ture income, development rebate reserve, development a l lowance reserve, investment a l lowance reserve, addi t ion made by the Assess ing Of f icer on a/c of concealed income, etc .

However, i t doesn’t include provis ion and reserve meant for spec i f i c l iab i l i ty i .e .

provis ion o f deprec iat ion / taxat ion / d i v idend, addi t ion made by the AO on a/c of d isa l lowance of expendi ture etc .

A. “Accumulated prof i t ” inc ludes capi ta l ised prof i t except fo r sec. 2(22)(e) .

B. Accumulated prof i t for the purpose of sec. 2 (22) inc lude

Company which is not in l iqu idat ion

: Upto the day of d is t r ibut ion or payment ;

Company in l iqu idat ion : Upto the day of l iqu idat ion

L iqu idat ion due to compulsory acquis i t ion

: Any prof i t o f company jus t preceding 3 years immediate ly preceding the PY in wh ich such acquis i t ion took p lace.

Div ided u/s 2(22)(e) : Upto the day o f gran t o f such loan.

Taxabi lity:

Dividend received fm Taxable in the

hands of

Domestic company

Dividend exc lud ing deemed d iv idend u /s 2(22) (e) : Exempted u /s 10(34) .

Deemed d iv idend u /s 2(22)(e)

o ther than loan to a concern

: Shareholder .

loan to a concern : Recip ient .

Foreign company : Shareholder .

Co-operat ive society : Recip ient .

A. Dividend as spec i f ied u/s 2(22)(a) / (b ) / (c ) / (d ) is exempted in the hands of shareholder . On which company is requi red to pay d iv idend tax @ 15% plus surcharge @ 5% plus educat ion cess @ 3% . However d iv idend as per sec. 2(22)(e) is taxable in the hands of shareholder on which TDS is requi red to be deducted.

KEY POINTS

KEY POINTS

Income under the head other source

Education

Transcript of Income under the head other source