Direct and Indirect Taxation · Income from Other Sources

Interest on Securities, Compensation and Other Specified Incomes

Updated 10 October 2026 · Fact-checked

Under section 92(2) of the Income-tax Act, 2025, specified incomes such as interest on securities, machinery or plant letting, lottery and game winnings, and termination compensation are taxed as Income from Other Sources. This applies only if they are not taxed under Business or Salaries. For winnings, no expense deduction is allowed.

Understand Interest on Securities, Compensation and Other Specified Incomes

Section 92(1) is a residual charge. Any income that is not exempt and does not fall under the heads in section 13(a) to (d) is taxed as Income from other sources. Section 92(2) then lists items that are taxed here "in particular". This page covers five of those items.

Interest on securities (section 92(2)(e)) is taxed here if it is not chargeable as business income. A person who holds securities as an investment is taxed here. A trader or a finance company whose business is dealing in securities is taxed under business.

Letting of machinery, plant or furniture (clauses (f) and (g)) is taxed here if it is not business income. Clause (g) also covers buildings let along with the machinery, where the letting of the building cannot be separated from the letting of the machinery. If letting is the assessee's business, the income goes under business. Remember that section 26(4) sends rent from letting a residential house to House Property only.

Winnings (clause (b)) include lotteries, crossword puzzles, races including horse races, card games and other games of any sort, gambling and betting. Section 92(5) widens this to game shows and similar television or electronic programmes where people compete for prizes, and to prizes awarded by draw of lots or chance.

Termination compensation (clause (j)) is any compensation or payment received in connection with termination of employment or modification of its terms and conditions. Compare section 26(2)(b): compensation to a person managing the affairs of a company, holding an agency, or under a business contract, on termination or modification, is business income. So the capacity of the receiver decides the head.

Section 94 governs deductions. Personal expenses are not allowed. Sections 29, 35(b)(i) and 36 apply as for business. For winnings, section 94(4) allows no deduction for any expenditure or allowance. The exception in section 94(5) covers an owner of horses maintained for running in races, for income from owning and maintaining such horses.

Key rules to remember

Residual charge: Taxable here = income not exempt and not chargeable under heads in section 13(a) to (d); Section 92(1). Check the other heads first.
Interest on securities: Section 92(2)(e): taxable here if not chargeable under Profits and gains of business or profession; Dealers in securities are taxed under business.
Machinery, plant, furniture letting: Section 92(2)(f) and (g): taxable here if not business income; Clause (g) covers buildings whose letting is inseparable from the machinery letting.
Winnings: Taxable winnings = gross winnings, with no deduction; Section 92(2)(b) charges them and section 94(4) bars all deductions. Horse-owner exception in section 94(5).
Termination compensation: Section 92(2)(j): compensation on termination or modification of employment terms is charged here; For managers of companies, agents or contract parties, section 26(2)(b) makes it business income.
Deductions allowed: Sections 29, 35(b)(i) and 36 apply; personal expenses and specified unpaid foreign payments are barred (section 94(1)); Collection charges on interest are a common allowed item.

How to solve Interest on Securities, Compensation and Other Specified Incomes questions

Use this order for any question on specified incomes under Other Sources.

1List each receipt and name the exact clause of section 92(2) that may apply.
2Check whether another head applies first: business (section 26), salary, house property or capital gains.
3Check exemptions, if the question gives any, and remove exempt amounts.
4Deduct permitted expenses under section 94 for interest, machinery rent and similar items. Allow none against winnings.
5Treat the winnings and other income at their gross amount where no deduction is allowed.
6Total the figures under the head and present them in a clear table-style list with the clause for each item.
7Write one line of reasoning for each item that is not taxed here.

Quickest way: Head-first check

When to use it: Use it for MCQs and for short parts in a long computation.

Ask first: is the person in this business? If yes, business income.
If not, match the item to a clause of section 92(2).
For winnings, take the gross amount and stop.
For interest or rent, subtract only the expenses stated in the question.
Add the items and note the section for each.

Common mistakes in Interest on Securities, Compensation and Other Specified Incomes

Deducting expenses from lottery or game winnings.
Students treat winnings like other income where costs are allowed.
Fix: Section 94(4) allows no deduction. Tax the full amount, even if a ticket cost or a loss exists.
Taxing interest on securities here for a person whose business is dealing in securities.
Students match the item name without checking the business.
Fix: Clause (e) applies only if the income is not chargeable as business income. Check the facts.
Putting rent from a let-out residential house under Other Sources.
Confusion with letting of machinery or furniture.
Fix: Section 26(4) sends it to House Property. Only machinery, plant, furniture and inseparable buildings come here.
Treating all termination compensation as salary or all as other sources.
Students ignore the capacity of the receiver.
Fix: An employee's termination payment falls under section 92(2)(j). A manager of a company, an agent or a contract party falls under section 26(2)(b).
Ignoring the wider meaning of games and lotteries.
Students think only of traditional lotteries.
Fix: Section 92(5) covers game shows, television or electronic competitions for prizes and draws by chance.
Allowing personal expenses against income here.
Students allow every cost mentioned in the question.
Fix: Section 94(1)(a) bars personal expenses. Allow only costs incurred to earn the income.

Worked examples

Example 1

Mr. Arvind Rao, an investor, received in the tax year 2026-27: interest on listed company debentures ₹48,000; lottery winnings ₹2,00,000 (ticket cost ₹5,000); and rent of ₹60,000 for letting out a machine, with repairs of ₹6,000 and depreciation of ₹10,000 allowable under sections applied by section 94(2). He has no business in these. Compute his income from other sources for these items.

Show the solution

Interest on debentures is interest on securities under section 92(2)(e) and is not business income. Taxable gross amount: ₹48,000. No expense is given.
Lottery winnings fall under section 92(2)(b). Section 94(4) allows no deduction, so the ticket cost of ₹5,000 is ignored. Taxable: ₹2,00,000.
Machine rent is taxable under section 92(2)(f). Rent ₹60,000 less repairs ₹6,000 less depreciation ₹10,000 = ₹44,000.
Total = ₹48,000 + ₹2,00,000 + ₹44,000 = ₹2,92,000.

Answer: Income from other sources for these items = ₹2,92,000.

Example 2

Ms. Kavita Shah, an employee of Sundaram Ltd, received ₹3,00,000 on termination of her employment. Mr. Dinesh Gupta, who managed the affairs of an Indian company, received ₹5,00,000 on termination of his management role. State the head of income for each.

Show the solution

Ms. Shah is an employee. A payment on termination of employment falls under section 92(2)(j), so it is taxed as income from other sources.
Mr. Gupta wholly or substantially managed the affairs of an Indian company. Section 26(2)(b)(i)(A) charges compensation on termination of management as business income.
State the heads separately with the amounts: ₹3,00,000 and ₹5,00,000.

Answer: Ms. Shah: ₹3,00,000 under Income from other sources (section 92(2)(j)). Mr. Gupta: ₹5,00,000 under Profits and gains of business or profession (section 26(2)(b)).

Exam tips

In MCQs, look for the phrase "no deduction" with winnings and pick the gross amount.
Always state the clause and head for each item; step marks depend on it.
When the question says a person is a dealer or trader, check whether the item belongs under business.
For machinery letting, read whether it is the assessee's business. If it is, the answer is not Other Sources.
Use the 2025 Act terms: tax year, not assessment year.

Practice questions from Income from Other Sources

Interest on Securities, Compensation and Other Specified Incomes in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Interest on Securities, Compensation and Other Specified Incomes: frequently asked questions

Is interest on securities always taxed under Income from Other Sources?

No. Section 92(2)(e) applies only if the interest is not chargeable as business income. A person who deals in securities as a business is taxed under business.

Can I deduct expenses from lottery winnings?

No. Section 94(4) allows no deduction for expenditure or allowance related to winnings. The exception in section 94(5) covers an owner of horses maintained for running in races, for income from owning and maintaining those horses.

Which head applies to compensation on termination of employment?

Section 92(2)(j) charges it as income from other sources. Section 26(2)(b) covers compensation to those who manage a company, hold an agency or are party to a business contract.

Does a game show prize count as winnings?

Yes. Section 92(5)(b) includes a game show or similar entertainment programme on television or electronic mode where people compete to win prizes within card games and other games of any sort.