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Income Tax

Short- and long-term Capital Gains

A capital asset that is held for less than three years is deemed to be a short-term asset. If sold, it attracts tax at the normal rates. An asset that has been held for more than three years is deemed as long-term asset, and attracts tax at concessional rates when sold. The gains arising out of short- term assets are charged as Short-term Capital Gains and those gains arising from the long tem assets are charged under as Long-term Capital Gains 

However, in the case of securities such as equity or preference shares, debentures, government issuing, and units of mutual funds and the Unit Trust of India (UTI), the assets are deemed short-term if they are held for less than a year. Conversely, these assets are deemed long-term if they are held for more than a year.

Income from other sources

Income of every kind, which is not chargeable to income tax under the heads salary, income from house property, profits and gains of business and profession, capital gains can be taxed under the head "income from other sources".

           This is income that is not chargeable to tax under any other head of income. Such income covers...

  1. Dividend

Under Section 10(33), any amount declared or paid by an Indian company by way of dividend is tax-exempt in the hands of shareholders. Therefore, any dividend income received from a company that is not an Indian company will be taxable in the hands of the recipient.

  1. Winnings from lotteries, crossword puzzles, horse races and game shows

In the case of winnings from lotteries, crossword puzzles, races (including horse races), card games, game shows and other games of any sort, or from gambling or betting of any form or nature whatsoever, Rs. 5,000 is exempt from tax. Tax will be deducted at source on the rest of the winnings at the rate of 30 per cent (plus surcharge).

Winnings from game shows like Kaun Banega Crorepati will be covered by this clause from 1 June 2001. Winnings before this date will not be subject to TDS; you will have to pay tax yourself.

  1. Interest on securities

The income from interest on securities is chargeable to tax if the securities are held as an investment, and not as stock-in-trade. If the securities are held as stock-in-trade, the interest income is taxable under the head ‘profits and gains from business or profession’. Although interest income is taxed under the head ‘income from other sources’, a deduction is available in some cases under section 80L.

  1. Others
  2. The interest on bank deposits and loans (except in the case of assessees in the money-lending business).
  3. Income from letting-out machinery, plant, furniture or buildings on hire if they are not chargeable to tax under the head ‘profits and gains from business or profession’.
  4. Interest received on a tax refund
  5. Ground rent
  6. Royalty
  7. Director’s fees from a company.

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