Tax Laws and Practice · Income from Other Sources

Deductions and Disallowed Amounts under Income from Other Sources

Updated 11 October 2026 · Fact-checked

Income from other sources is computed after the deductions in section 93: commission for realising interest on securities, family pension deduction, and any revenue expense wholly and exclusively for earning the income. Section 94 bars personal expenses and certain foreign payments. Dividend and mutual fund income get no deduction at all. Gambling-type winnings get none either.

Understand Deductions and Disallowed Amounts under Other Sources

Income from other sources is the residual head. Income that does not fit any other head lands here. Like other heads, you do not tax gross receipts. You tax the net income after the deductions the Act allows.

Section 93 lists the allowed deductions. Section 94 lists what you cannot deduct. Read the two together. Section 93 gives the permission, and section 94 starts with "irrespective of anything contained in section 93", so a barred item stays barred even if it looks like a business cost.

The main allowed items are these. Collection charges paid to a banker or other person for realising interest on securities are allowed if reasonable. Family pension gets a fixed-limit deduction. Any other revenue expenditure laid out wholly and exclusively to earn the income is allowed. Receipts like rent from machinery, plant or furniture, or from letting a building together with them, get deductions by reference to business rules (including section 28 items and section 33 depreciation), as far as may be.

The law changed from 1-4-2026 (Act No. 4 of 2026). Earlier, dividend collection charges were allowed and interest up to 20% of dividend or mutual fund unit income could be claimed. Now clause (a) covers only interest on securities. Section 93(2) says no deduction at all against dividend income or specified mutual fund and UTI unit income. So interest expense cannot be claimed against dividends. Write the current position in your answers.

Section 94 bars personal expenses, interest payable outside India without tax paid or deducted, and salary payable outside India without tax paid or deducted. Winnings from lotteries, races, card games and betting get no deduction for any related expense. The only carve-out is a horse owner maintaining horses for racing, who can claim expenses of that activity.

Key rules to remember

Collection charges on interest on securities: Deduction = reasonable commission or remuneration paid to a banker or other person for realising the interest; Section 93(1)(a). From 1-4-2026 it covers interest on securities only, not dividends.
Family pension deduction: Deduction = lower of (1/3 × family pension) and ₹25,000 (section 202(1) regime) or ₹15,000 (any other case); Section 93(1)(d). Family pension is a regular monthly amount paid by the employer to a family member after the employee's death.
General expense deduction: Allowed: revenue expenditure wholly and exclusively for making or earning the income; Section 93(1)(e). Capital expenditure is not allowed.
Dividend and specified fund unit income: Deduction = nil; Section 93(2). Covers dividend, income from specified mutual fund units and specified UTI company units. No interest deduction.
Gambling-type winnings: Deduction = nil; Section 94(4). Lotteries, crosswords, races, card games, betting. Exception under 94(5) for owners of race horses maintained for racing.
Income from letting machinery, plant or furniture: Deductions as per section 28(1)(a), (b), (d), section 33 (depreciation), subject to section 28(2); Section 93(1)(c), as far as may be. Applies to income under section 92(2)(f) and (g).
Other receipts with fixed deduction: Income under section 92(2)(i): deduction = 50% of such income, and no other deduction; Section 93(1)(f). Check the Act for what this clause covers before quoting it.
Fully deducted receipts: Commutation of pension from a Schedule VII fund and gratuity on the employee's death: entire amount deducted; Section 93(1)(g) and (h).

How to solve Deductions and Disallowed Amounts under Other Sources questions

Use the same sequence for any question asking what you can deduct from income under other sources.

1List each receipt and name its type: interest on securities, dividend, mutual fund units, family pension, machinery rent, winnings or others.
2Check for a bar first. Dividend and specified unit income: nil deduction. Winnings: nil deduction. Personal expense: not allowed.
3For interest on securities, allow only the reasonable collection commission or remuneration.
4For family pension, compute one-third of the amount, compare it with the cap (₹25,000 or ₹15,000 as the regime requires), and take the lower.
5For other expenses, test two things: is it revenue in nature, and is it wholly and exclusively for earning that income?
6Check section 94 for foreign payments. Interest or salary payable outside India is disallowed unless tax was paid or deducted.
7Deduct the allowed amounts, state the net figure, and give a one-line conclusion citing sections 93 and 94.

Quickest way: Bar first, then allow

When to use it: Use this in a short-answer or computation question with several receipts and expenses mixed together.

Tick each receipt: dividend or unit income means strike off all expenses.
Winnings means strike off all expenses (except horse owner racing activity).
Strike off personal items and unpaid-tax foreign payments.
Cap family pension at the lower of one-third and the limit.
Allow commission only against interest on securities and only if reasonable.
Add the balance as net income and write the section numbers beside each step.

Common mistakes in Deductions and Disallowed Amounts under Other Sources

Claiming interest on a loan against dividend income, up to 20% of the dividend.
Older material and the earlier Act allowed this limit.
Fix: From 1-4-2026 section 93(2) allows no deduction against dividend or specified unit income. Claim nothing.
Allowing commission for collecting dividends.
Old clause (a) covered dividends and interest.
Fix: Clause (a) now mentions interest on securities only. Do not deduct collection charges on dividends.
Deducting the full one-third of family pension without the cap.
Students remember the fraction and forget the limit.
Fix: Take the lower of one-third and the cap. The cap is ₹25,000 under section 202(1) and ₹15,000 otherwise.
Deducting expenses such as stakes or travel from lottery or race winnings.
Students treat winnings like business income.
Fix: Section 94(4) allows no deduction. Tax the gross winnings. Only a horse owner maintaining horses for racing is excepted.
Allowing capital expenditure or personal costs under the general clause.
The words 'any other expenditure' look wide.
Fix: Section 93(1)(e) excludes capital expenditure and needs a wholly and exclusively test. Section 94(1)(a) bars personal expenses.
Ignoring tax deduction on payments abroad.
Students focus on the expense and skip the condition.
Fix: Interest or salary payable outside India is disallowed unless tax was paid or deducted under Chapter XIX-B.

Worked examples

Example 1

Mrs. Meera Iyer receives family pension of ₹54,000 a year after her husband's death. Compute the deduction under section 93 if tax is computed under section 202(1), and then if it is computed otherwise.

Show the solution

One-third of ₹54,000 = ₹18,000.
Under section 202(1): lower of ₹18,000 and ₹25,000 = ₹18,000. Income = ₹54,000 − ₹18,000 = ₹36,000.
In any other case: lower of ₹18,000 and ₹15,000 = ₹15,000. Income = ₹54,000 − ₹15,000 = ₹39,000.

Answer: Deduction is ₹18,000 (taxable ₹36,000) under section 202(1), and ₹15,000 (taxable ₹39,000) otherwise, under section 93(1)(d).

Example 2

Rohan Mehta received dividend of ₹40,000 from an Indian company and interest on securities of ₹60,000. He paid ₹3,000 as a reasonable commission to his banker for realising the interest, and paid ₹8,000 as interest on a loan taken to buy the shares. Compute income from other sources for the current tax year.

Show the solution

Dividend ₹40,000: section 93(2) allows no deduction, so the ₹8,000 loan interest is not allowed. Taxable dividend = ₹40,000.
Interest on securities ₹60,000: the reasonable commission of ₹3,000 is allowed under section 93(1)(a). Net = ₹57,000.
Total = ₹40,000 + ₹57,000 = ₹97,000.

Answer: Income from other sources is ₹97,000. The ₹8,000 interest is disallowed against dividend, and the ₹3,000 commission is allowed against interest on securities.

Exam tips

Write the post 1-4-2026 position on dividends. Say clearly that no deduction is allowed, citing section 93(2).
For family pension, always show the one-third figure, the cap and the lower of the two.
In a mixed computation, set out receipts one by one with the allowed deduction beside each, then total.
Quote the general test in your own words: revenue in nature, wholly and exclusively to earn the income.
End with a one-line conclusion citing section 93 or 94, as ICSI answers expect.

Practice questions from Income from Other Sources

Deductions and Disallowed Amounts under Other Sources in other exams

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

Deductions and Disallowed Amounts under Other Sources: frequently asked questions

Can interest expense be claimed against dividend income?

No. Under section 93(2), as substituted from 1-4-2026, no deduction is allowed against dividend income or specified mutual fund and UTI unit income. The earlier 20% interest limit no longer applies.

What is the deduction for family pension?

It is the lower of one-third of the family pension and ₹25,000 where tax is computed under section 202(1). In any other case the limit is ₹15,000. This is under section 93(1)(d).

Are collection charges allowed on dividend income?

Not now. Section 93(1)(a) allows reasonable commission or remuneration only for realising interest on securities. Dividend collection charges were allowed earlier but not from 1-4-2026.

Can I deduct expenses from lottery or game winnings?

No. Section 94(4) bars any deduction for expenditure related to winnings from lotteries, races, card games, gambling or betting. A horse owner maintaining horses for racing can claim the expenses of that activity under section 94(5).