Skip to content

Tax Laws and Practice · Income from Other Sources

Income from Other Sources Numericals with Solutions

Updated 11 October 2026 · Fact-checked

To compute income from other sources, list every receipt that no other head covers: gifts, dividends, interest, winnings. Add the taxable amounts, then subtract only allowed deductions. Winnings get no deduction at all, except for owners of race horses. Personal expenses are never deductible. The result goes into gross total income.

Understand Computation Problems and Practical Illustrations

Income from other sources is the residual head. If an income is taxable but does not fit salary, house property, business or capital gains, it lands here. Typical items are dividends, interest, winnings from lotteries and games, and gifts received without consideration.

Numerical questions usually mix several of these in one problem. Your job is to treat each item separately. Decide whether it is taxable, how much of it is taxable, and what deduction, if any, can be set against it.

The deduction rules are strict. Under section 94 of the Income-tax Act, 2025, personal expenses of the assessee are not deductible under this head. Interest or salary payable outside India is not deductible unless tax has been paid or deducted. Winnings from lotteries, crossword puzzles, races including horse races, card games, other games, gambling or betting get no deduction for any related expenditure or allowance.

There is one exception. Under section 94(5), the bar in section 94(4) does not apply to an owner of horses maintained for running in horse races, for the activity of owning and maintaining those horses. Their expenses are then allowed under the normal rules: section 94(2) applies sections 29, 35(b)(i) and 36 to this head as they apply to business income. A "horse race" here means a race on which wagering or betting may be lawfully made.

For gifts, check the donor first. Gifts from relatives, and gifts on marriage, are not taxed. For gifts from other persons, the exemption limit and conditions are in the gift provision of the Act. Take them from your study material and apply them before you add anything to income.

Key rules to remember

Income from other sources
Taxable receipts (gifts + dividend + interest + winnings + other items) – allowed deductions
Work item by item. Never deduct one item's expense from another item.
No deduction for winnings
Income from winnings = gross winnings
Applies to lotteries, crosswords, races, card games, other games, gambling and betting. Section 94(4).
Horse-owner exception
Race-horse owner: winnings – maintenance expenses allowed under section 94(2)
Section 94(5) switches off section 94(4) only for the activity of owning and maintaining horses for races. The expenses are then tested under sections 29, 35(b)(i) and 36 as applied by section 94(2).
Non-deductible items
Personal expenses = nil deduction
Section 94(1)(a). Interest or salary payable outside India is also disallowed unless tax has been paid or deducted.
Gift test
Gift from relative or on marriage = not taxed; gift from any other person = test against the limit in the gift provision
Take the exact limit and exempt categories from your study material. Do not assume a figure from memory.
Deductions against other receipts
Deduction = only expenses the Act allows under this head
Section 94(2) applies sections 29, 35(b)(i) and 36. Personal expenses are never allowed. If the question gives no allowable expense, take the receipt gross.

How to solve Computation Problems and Practical Illustrations questions

Use the same routine for every numerical. It stops you from missing items or taking deductions you are not allowed.

  1. 1Read the facts and list every receipt in a column. Mark each as taxable, exempt or belonging to another head.
  2. 2Drop exempt items first, such as gifts from relatives, and remove items taxed under salary, business or capital gains.
  3. 3For gifts, check the donor. Relatives and marriage gifts are not taxed. For other donors, apply the limit and conditions from your study material and state the limit you used.
  4. 4For dividends and interest, deduct only expenses the Act allows under this head. If the question gives none that qualify, take the receipt gross.
  5. 5For winnings, take the gross amount. Allow no deduction under section 94(4), unless the person owns race horses and the expenses relate to owning and maintaining them. Then section 94(5) applies and the expenses are tested under section 94(2).
  6. 6Disallow personal expenses, and any payment outside India where tax was not paid or deducted.
  7. 7Add the net amounts to get income from other sources, then write one line of conclusion citing section 94 where deductions were refused.

Quickest way: Three-column scan

When to use it: Use it when the question has many receipts and little time.

  1. Draw three columns: Receipt, Taxable?, Deduction allowed.
  2. Fill the winnings row first: gross amount, deduction nil (unless horse owner).
  3. Fill the gift row by donor and limit, then the dividend and interest rows with only the deductions the Act allows.
  4. Sum the last column and write one sentence per disallowed item, citing section 94.

Common mistakes in Computation Problems and Practical Illustrations

  • Deducting expenses, such as ticket cost or travel, from lottery or game winnings

    Students treat winnings like business income.

    Fix: Take the gross winnings. Section 94(4) allows no expenditure or allowance against them.

  • Applying the horse-owner exception to anyone who bets on horses

    The exception is remembered but not its condition.

    Fix: Section 94(5) covers only the owner of horses maintained for races, for the activity of owning and maintaining them.

  • Using a gift limit remembered from somewhere without checking the current provision

    Students rely on a figure from memory and may confuse a threshold with an exemption.

    Fix: Take the limit, conditions and exempt categories from your study material. State the limit you applied in your answer.

  • Deducting any expense the question mentions against dividend or interest

    Students claim whatever cost the question lists.

    Fix: Allow only expenses the Act permits under this head, as applied by section 94(2). Personal expenses are never allowed.

  • Adding exempt gifts from relatives to income

    Students do not check who gave the gift.

    Fix: Check the donor first. A gift from a relative is not taxable.

  • Giving a bare number with no conclusion

    Students stop after arithmetic.

    Fix: End with a statement of income under the head and the provision that applied.

Worked examples

Example 1

Mr Mehta, a resident individual, has these receipts in the tax year: (a) gift of ₹2,00,000 from his brother; (b) dividend from an Indian company ₹60,000, with no expense claimed against it; (c) bank savings interest ₹18,000; (d) lottery winnings ₹1,00,000, ticket purchases cost ₹5,000. Compute his income from other sources.

Show the solution
  1. Gift from brother: a relative, so not taxable.
  2. Dividend: ₹60,000, taxable in full as no allowable expense is given.
  3. Bank interest: ₹18,000, taxable in full.
  4. Lottery winnings: gross ₹1,00,000. Under section 94(4) the ₹5,000 ticket cost is not deductible.
  5. Total = ₹60,000 + ₹18,000 + ₹1,00,000 = ₹1,78,000.

Answer: Income from other sources = ₹1,78,000. The brother's gift is not taxed, and the ticket cost cannot be deducted under section 94(4).

Example 2

Ms Rao owns race horses and had these receipts: prize money from horse races ₹4,00,000, with ₹1,50,000 spent on maintaining the horses (assume this is allowable under sections 29, 35(b)(i) and 36); winnings from a card game ₹80,000, with ₹10,000 spent on travel to play; bank interest ₹30,000. Compute her income from other sources.

Show the solution
  1. Horse-race prize money: Ms Rao is the owner of horses maintained for running in races. Section 94(5) says section 94(4) does not apply to this activity.
  2. The maintenance expenses are therefore allowed under section 94(2), which applies sections 29, 35(b)(i) and 36. Net race income = ₹4,00,000 – ₹1,50,000 = ₹2,50,000.
  3. Card game winnings: ₹80,000. Section 94(4) applies, so the ₹10,000 travel cost is not allowed. Take ₹80,000.
  4. Bank interest: ₹30,000.
  5. Total = ₹2,50,000 + ₹80,000 + ₹30,000 = ₹3,60,000.

Answer: Income from other sources = ₹3,60,000. Maintenance of her race horses is allowed because section 94(5) disapplies section 94(4) and the expense is allowable under section 94(2). The card-game expense is not deductible under section 94(4).

Exam tips

  • Always state the provision before the figure, for example "Under section 94(4), no deduction is allowed against winnings." ICSI style rewards this.
  • Set out each receipt on its own line with a reason. Partial marks usually come from correct treatment of individual items.
  • Read the donor's relationship in gift questions before any arithmetic, and state the limit you apply for non-relative gifts.
  • Watch for traps: personal expenses, travel costs on winnings, and expenses the Act does not allow.
  • Close with a one-line conclusion giving the final income under this head.

Practice questions from Income from Other Sources

Computation Problems and Practical Illustrations: frequently asked questions

Can I deduct expenses from lottery winnings?

No. Section 94(4) of the Income-tax Act, 2025 says no deduction for any expenditure or allowance related to winnings from lotteries, crossword puzzles, races, card games, other games, gambling or betting.

Is there any exception for horse races?

Yes. Under section 94(5), section 94(4) does not apply to an owner of horses maintained for running in horse races, for the activity of owning and maintaining them. Their expenses are tested under section 94(2). The race must be one on which wagering or betting may be lawfully made.

Can I deduct interest or other expenses against dividend income?

Only expenses the Act allows under this head. Section 94(2) applies sections 29, 35(b)(i) and 36, and section 94(1) bars personal expenses. Check your study material for the exact conditions and any limit before you claim a deduction.

Are gifts from a friend taxable?

It depends on the donor and the amount. Gifts from relatives and gifts on marriage are not taxed. For gifts from others, apply the exemption limit in the gift provision as given in your study material, and state that limit in your answer.