Income-tax law / Deductions

Section 57 Income Tax Act: Deductions from Other Sources

Section 57 of the Income-tax Act, 1961 specifies deductions when calculating taxable income under the head Income from other sources. It operates with Section 56 (chargeability) and Section 58 (disallowances). The applicable assessment year, nature of receipt and tax regime must be checked before claiming a deduction.

Meaning and scope of Section 57

A deduction is an amount permitted to be subtracted from income chargeable under this head. Section 57 does not create a general exemption: only expenditure or statutory allowances meeting its conditions qualify. Income taxable as business income or salary is governed by the provisions applicable to that head.

Deductions under the principal clauses

Section 57(i): Dividends and interest on securities

The clause concerns reasonable commission or remuneration for realising specified income, but its dividend-related operation is subject to the later restrictive provisos. For dividend income and specified mutual fund or unit income, only eligible interest expenditure is deductible, capped at 20% of that income; collection charges and other expenses are not deductible against such dividend income. A further restriction applies to dividends covered by Section 2(22)(f). The special treatment of interest on securities must be considered separately.

Section 57(ia): Employees' welfare fund contributions

Where employees' contributions covered by Section 2(24)(x) are taxed under this head, deduction follows Section 36(1)(va), including the condition that contributions are credited to the relevant fund by the statutory due date. This is distinct from the employer's contribution.

Section 57(ii): Letting machinery, plant, furniture and buildings

For receipts covered by Section 56(2)(ii) and (iii), eligible rent, repairs, insurance and depreciation may be deducted by reference to Sections 30, 31, 32 and 38, subject to their respective conditions. This covers certain hiring arrangements not taxable as business income.

Section 57(iia): Family pension

Family pension means a regular monthly amount payable by an employer to a family member after an employee's death. The deduction is the lower of one-third of family pension or Rs. 15,000 under the old tax regime. For tax computed under Section 115BAC(1A)(ii), the limit is Rs. 25,000 from assessment year 2025-26. Family pension is generally taxed as income from other sources, not salary; specific exemptions may apply in qualifying cases.

Example: If annual family pension is Rs. 90,000, one-third is Rs. 30,000. The deduction is Rs. 15,000 under the old regime or Rs. 25,000 under the specified new regime; the corresponding taxable amounts are Rs. 75,000 and Rs. 65,000.

Section 57(iii): Other expenditure wholly and exclusively incurred

Revenue expenditure incurred wholly and exclusively for making or earning taxable income may qualify. Personal or capital expenditure is excluded. Evidence of purpose and a sufficient connection to the income are important; Section 58 and other applicable restrictions must also be considered.

Section 57(iv): Interest on compensation

Where interest on compensation or enhanced compensation is taxable under Section 56(2)(viii), 50% of that interest is deductible. No other deduction under Section 57 is available against that particular interest income.

Important limits and related provisions

Section 56: determines receipts chargeable under the head.
Section 58: restricts deductions, including personal expenditure and certain payments subject to withholding requirements.
Section 115BAC: determines eligibility for the enhanced family-pension deduction under the specified new regime.
Section 145A: addresses timing of recognition of certain interest on compensation.

Income-tax Act, 2025

The Income-tax Act, 2025 is applicable from 1 April 2026, with transition and savings rules relevant to earlier tax years. Section 93 sets out deductions under the head "Income from other sources" in the new Act. For assessment and proceedings concerning earlier years, check the applicable provisions of the 1961 Act and transitional rules rather than assuming the new numbering applies retrospectively.

Official legislation and guidance

Original article and historical amendment notes

The earlier webpage text is preserved below as historical reference. Some amounts and wording have since changed; use the updated discussion and official legislation above for current application.

Show original statutory extract and amendment notes

The income chargeable under the head "Income from other sources" shall be computed after making the following deductions, namely:-

(i) 1 in the case of dividends, other than dividends referred to in section 115-O, 2 or interest on securities, any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realising such dividend 2 or interest on behalf of the assessee;

3 (ia) in the case of income of the nature referred to in sub-clause (x) of clause (24) of section 2 which is chargeable to income-tax under the head "Income from other sources", deductions, so far as may be, in accordance with the provisions of clause (va) of sub-section (1) of section 36;

(ii) in the case of income of the nature referred to in clauses (ii) and (iii) of sub-section (2) of section 56, deductions, so far as may be, in accordance with the provisions of sub-clause (ii) of clause (a) and clause (c) of section 30, section 31 and 4 sub-sections (1) 5 *** and (2) of section 32 and subject to the provisions of 6 section 38;

7 (iia) in the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and one-third per cent of such income or 8 fifteen thousand rupees, whichever is less.

Explanation.-For the purposes of this clause, "family pension" means a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his death;

(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income;

9 (iv) in the case of income of the nature referred to in clause (viii) of sub-section (2) of section 56, a deduction of a sum equal to fifty per cent of such income and no deduction shall be allowed under any other clause of this section.

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1. Subs. by Act 32 of 2003, s. 32, for "in the case of dividends" (w.e.f. 1-4-2004).
2. Ins. by Act 26 of 1988, s.19 (w.e.f. 1-4-1989).
3. Ins. by Act 11 of 1987, s. 27 (w.e.f. 1-4-1988).
4. Subs. by Act 42 of 1970, s. 14, for "sub-sections (1) and (2) of section 32" (w.e.f. 1-4-1970).
5. The brackets, figure and letter "(1A)" omitted by Act 46 of 1986, s. 32 (w.e.f. 1-4-1988).
6. Subs. by s. 32, ibid., for "sections 34 and 38" (w.e.f. 1-4-1988).
7. Ins. by Act 13 of 1989, s. 13 (w.e.f. 1-4-1990).
8. Subs. by Act 26 of 1997, s. 20, for "twelve thousand rupees" (w.e.f. 1-4-1998).
9. Ins. by Act 33 of 2009, s. 27 (w.e.f. 1-4-2010).
10. The proviso omitted by Act 32 of 1994, s. 19 (w.e.f. 1-1995).
11. The Explanation omitted by Act 26 of 1988, s. 19 (w.e.f. 1-4-1989).