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CA Intermediate · Taxation · Income from Other Sources

Mrs. Sunita Rao, a resident individual with no business income, received in tax year 2026-27 a dividend of ₹1,50,000 from an Indian company and interest of ₹20,000 on a bank fixed deposit. She had borrowed money to invest in those shares and paid interest of ₹40,000 on the loan. She also paid ₹5,000 to a broker as commission for collecting the dividend. What is her income from other sources for the tax year?

Her income from other sources is ₹1,40,000. Only interest on the borrowing is deductible against dividend, limited to 20% of the dividend, which is ₹30,000. Commission is disallowed. So dividend is ₹1,20,000, plus ₹20,000 of FD interest.

  1. A₹1,25,000
  2. B₹1,40,000Correct
  3. C₹1,35,000
  4. D₹1,70,000

Explanation

From dividend income, only interest expenditure is deductible, and it is capped at 20% of the dividend: 20% of ₹1,50,000 = ₹30,000. Commission paid for collecting the dividend is not deductible. Dividend taxable = ₹1,50,000 − ₹30,000 = ₹1,20,000. Adding the FD interest of ₹20,000 gives ₹1,40,000. Deducting the commission too would give ₹1,35,000, and deducting the full interest and commission would give ₹1,25,000.

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