Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Income from Other Sources

Ms. Anita Desai, a resident individual, received dividends of Rs 24,000 from an Indian company and incurred Rs 3,000 as interest on a loan taken to buy those shares. Under the current law, how much is the dividend income chargeable under income from other sources?

Under the rule that interest on borrowing to earn dividends is deductible up to 20% of the dividend, Rs 3,000 is allowed, since the cap is Rs 4,800. Taxable dividend is Rs 24,000 minus Rs 3,000, which is Rs 21,000.

  1. ARs 21,000
  2. BRs 24,000Correct
  3. CRs 2,400
  4. DRs 4,800

Explanation

Dividend income is taxable in the recipient's hands at slab rates under Income from Other Sources. The only deduction allowed against dividend income is interest expense, capped at 20% of the dividend. 20% of Rs 24,000 = Rs 4,800, and actual interest is Rs 3,000, so Rs 3,000 is deductible and the taxable amount is Rs 21,000. Note the option of Rs 24,000 ignores this deduction.

Did you get it right without looking?

One question tells you little. A timed set on Income from Other Sources shows your real accuracy, how long you take and where you lose marks.

Practise Income from Other SourcesFree diagnostic mock

More Income from Other Sources questions