Tax Laws and Practice · Income from Other Sources

Interest on Securities, Hire Income and Keyman Insurance Receipts

Updated 11 October 2026 · Fact-checked

Under the Income-tax Act, 2025, section 92(2) lists specific receipts taxed as Income from Other Sources: interest on securities, hire income from plant, machinery or furniture, keyman insurance sums and employment termination payments. Interest, hire income and some keyman sums fall here only if not taxable as business income or salary. Check the head first, then apply the clause.

Understand Interest on Securities, Rental Income and Other Specific Receipts

Section 92(1) is the residual head. Any income that is not exempt and does not fall under salary, house property, business or profession, or capital gains is taxed under Income from Other Sources. Section 92(2) then names specific items so there is no doubt about them. This topic covers four groups of those items.

The first group is interest on securities (section 92(2)(e)). It is taxed here only if it is not chargeable under Profits and gains of business or profession. A bank or a dealer in securities earns such interest as part of its business, so it goes to business income. An ordinary investor holding debentures or government securities has no business, so the interest goes here.

The second group is hire income from machinery, plant or furniture (section 92(2)(f) and (g)). If you own these assets and let them on hire, the income is taxed here unless it is business income. Clause (g) covers a building let out along with the machinery, plant or furniture, where the letting of the building is inseparable from the letting of the other assets. The whole income is then taxed here. Letting only a building is different: it goes to House Property, or business if that is your business.

The third group is keyman insurance (section 92(2)(d)). A keyman policy is taken by a business on the life of a key person. A sum received under it, including the bonus, is taxed here only if it is not taxable as business income or as salary. Section 26(2)(i) already taxes keyman sums as business income, so check that first.

The fourth group is residual receipts. Under section 92(2)(j), any compensation or payment received in connection with termination of employment, or modification of its terms and conditions, is taxed here. Compare this with section 26(2)(b): compensation to a person managing an Indian company, or holding an agency, or under a business contract, on termination or modification is business income. Section 92(2)(h) taxes a forfeited advance received during negotiations for transfer of a capital asset, if the negotiations fail. Section 92(2)(i) taxes interest on compensation or enhanced compensation referred to in section 278(1).

Key rules to remember

Residual head rule: Taxable under Other Sources if: not exempt AND not under section 13(a) to (d) heads; Section 92(1). Always test the other heads first.
Interest on securities: Taxed under Other Sources if not chargeable as business income; Section 92(2)(e). A securities dealer or bank taxes it as business income.
Hire of plant, machinery, furniture: Hire income (plus inseparable building letting) is taxed under Other Sources if not business income; Section 92(2)(f) and (g). Letting only a building is not covered here.
Keyman insurance: Sum including bonus is taxed under Other Sources if not taxable as business income or salary; Section 92(2)(d). Section 26(2)(i) taxes the same sum as business income.
Termination of employment compensation: Compensation for termination or modification of employment terms is taxed under Other Sources; Section 92(2)(j). For managing a company, agency or business contract, see section 26(2)(b).
Forfeited advance: Advance forfeited AND negotiations fail to result in transfer of the capital asset = Other Sources; Section 92(2)(h). Both conditions must hold.
Interest on compensation: Interest on compensation or enhanced compensation under section 278(1) is taxed under Other Sources; Section 92(2)(i).

How to solve Interest on Securities, Rental Income and Other Specific Receipts questions

Use this order for any question on a specific receipt. The head depends on the nature of the receipt and who receives it.

1Identify the receipt and who receives it: an investor, a dealer, a company, an employee or a manager.
2Check if the receipt is exempt. If it is, leave it out of total income.
3Check if it is business income under section 26, for example a securities dealer's interest or a keyman sum taxed as business income.
4Check salary and house property. Keyman sums may be salary. A residential house let by its owner goes only to House Property.
5If no other head fits, match the receipt with the clause in section 92(2) and note any condition, such as failed negotiations plus forfeiture.
6Take the amount as stated in the clause, including the bonus for keyman policies.
7State the head, section and conclusion in a closing line.

Quickest way: Head-first test

When to use it: Use it for short-answer or MCQ-style questions where you must name the head quickly.

Ask: does the receiver carry on a business of this kind? If yes, business income.
Ask: is it a building only? If yes, House Property (or business).
Ask: is it hire of plant, machinery or furniture, with or without an inseparable building? If yes, Other Sources.
Ask: is it interest on securities, termination pay for an employee, or a forfeited advance? If yes, Other Sources.
Write the section 92(2) clause in your answer.

Common mistakes in Interest on Securities, Rental Income and Other Specific Receipts

Taxing a securities dealer's interest under Other Sources.
Students see the word 'interest on securities' and stop there.
Fix: Section 92(2)(e) applies only if the income is not chargeable as business income. Check whether the assessee is in the business.
Taxing rent from letting machinery with its building under House Property.
Students link any building income with House Property.
Fix: If the building letting is inseparable from the letting of machinery, plant or furniture, the whole income falls under section 92(2)(g).
Ignoring the condition for forfeited advances.
Students tax any advance received.
Fix: Both conditions must hold: the sum is forfeited and the negotiations do not result in transfer of the capital asset.
Mixing up termination payments of an employee and a company manager.
Both are 'compensation for termination'.
Fix: An employee's payment goes to Other Sources under section 92(2)(j). A person managing the affairs of a company, holding an agency, or under a business contract is taxed as business income under section 26(2)(b).
Excluding the bonus from the keyman insurance amount.
Students take only the sum assured.
Fix: Both section 92(2)(d) and section 26(2)(i) include the bonus allocated on the policy.

Worked examples

Example 1

Mr. Rao, a salaried employee, holds debentures of an Indian company and receives interest of ₹42,000 in the tax year. He is not in the business of dealing in securities. State the head of income.

Show the solution

The receipt is interest on securities received by an investor.
It is not exempt as per the facts given.
He carries on no business of dealing in securities, so it is not business income.
Section 92(2)(e) taxes interest on securities under Other Sources if it is not chargeable under business income.

Answer: The ₹42,000 is chargeable under Income from Other Sources under section 92(2)(e).

Example 2

M/s Shree Traders, a company that is not in the business of hiring out assets, lets out machinery and the factory building in which it is installed to another firm for ₹6,00,000 a year. The building cannot be let without the machinery. State the head of income.

Show the solution

The income comes from letting machinery along with a building.
The company does not carry on a business of letting, so it is not business income.
The letting of the building is inseparable from the letting of the machinery, which is the condition in section 92(2)(g).
So the whole ₹6,00,000 is taxed under one head, not split into House Property and Other Sources.

Answer: The entire ₹6,00,000 is taxable under Income from Other Sources under section 92(2)(g).

Exam tips

Always write the head first, then the section 92(2) clause, then your conclusion. This is the ICSI answer pattern.
Read the facts for 'business' language. One phrase such as 'dealer in securities' can change the head.
Learn the contrast pairs: section 92(2)(j) against section 26(2)(b), and section 92(2)(d) against section 26(2)(i).
Use Income-tax Act, 2025 section numbers only. Do not cite the 1961 Act for June 2027.
In forfeited advance questions, check both conditions before taxing.

Practice questions from Income from Other Sources

Interest on Securities, Rental Income and Other Specific Receipts in other exams

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

CA IntermediateInterest on Securities and Other Interest Income

Interest on Securities, Rental Income and Other Specific Receipts: frequently asked questions

When is interest on securities taxed as business income?

When the assessee carries on business where such interest is earned, such as a bank or a securities dealer. Section 92(2)(e) applies only if the income is not chargeable as business income.

Is keyman insurance taxable under Other Sources?

Only if it is not taxable as business income or salary. Section 26(2)(i) taxes keyman sums as business income, so check that first. If neither applies, section 92(2)(d) taxes the sum including bonus.

Under which head is compensation on termination of employment taxed?

Under Income from Other Sources, as per section 92(2)(j). This covers compensation on termination of employment or modification of its terms and conditions.

What if a building is let out alone?

Clause (g) applies only when the building letting is inseparable from the letting of machinery, plant or furniture. A building let alone is not covered by it. Section 26(4) sends residential house letting by the owner to House Property.