Section 58 of the Income-tax Act: Amounts Not Deductible
Section 58 restricts deductions while calculating taxable income under the head Income from other sources. It operates even where an expense might otherwise appear eligible under Section 57.
Meaning and scope of Section 58
Section 56 identifies income taxable under the residual head "Income from other sources". Section 57 specifies permitted deductions. Section 58 overrides those permissions for specified payments, personal expenses and certain winnings. An expenditure must satisfy both the positive conditions for deduction and the restrictions against deduction.
Amounts not deductible under Section 58
Section 58(1)(a): specific disallowances
- Clause (i) - Personal expenses: Household and other personal spending cannot be deducted from income from other sources.
- Clause (ia) - Section 40A(12): Expenditure falling within the restriction for specified employee-related welfare funds is disallowed as provided by that section.
- Clause (ii) - Interest payable outside India: Interest chargeable under the Act and payable abroad is disallowed where the applicable tax has not been paid or deducted under Chapter XVII-B, subject to the historical statutory exception for certain pre-1 April 1938 public-subscription loans.
- Clause (iii) - Salary payable outside India: Salary payments abroad are disallowed unless applicable tax has been paid or deducted under Chapter XVII-B.
Section 58(1A): tax-deduction defaults
Specified disallowance rules in Section 40(a), including the applicable rule for failure to deduct or deposit tax at source, extend to income from other sources. The precise sub-clauses and consequences must be checked for the relevant assessment year.
Section 58(2): restrictions under Section 40A
Section 40A applies, with necessary modifications, to computation under this income head. It includes restrictions such as certain excessive payments to related persons and payments made contrary to prescribed payment-mode requirements, where applicable.
Section 58(3): foreign companies
For a foreign company, the restrictions of Section 44D apply, as far as relevant, to income from other sources in the same way as for business or professional income. Section 44D deals with specified royalties and fees for technical services under qualifying historical arrangements.
Section 58(4): winnings from lotteries, games and betting
No expenditure or allowance connected with winnings from lotteries, crossword puzzles, races (including horse races), card games, other games, gambling or betting is deductible when computing such winnings. This restriction operates irrespective of whether the taxpayer actually incurred costs in earning the winnings.
Horse-owner exception: The provision does not prevent computation of income from the separate activity of owning and maintaining horses for running in horse races. The statutory explanation defines a horse race as one on which wagering or betting may lawfully be made.
Taxation of online-game winnings and applicable special rates also requires checking the specific charging, computation and withholding provisions for the year concerned.
Corresponding law: Section 94 of the Income-tax Act, 2025
Section 94 carries forward restrictions on personal expenses, specified interest and salary payments outside India, application of other disallowance provisions and the special rule for foreign companies. Its wording and cross-references are reorganised, so Section 58 of the 1961 Act should not be treated as the same-numbered provision in the 2025 Act.
The corresponding legislation should be consulted directly for any year governed by the new Act, including amendments and commencement provisions. Read the official Income-tax Act, 2025 (as amended).
Practical examples
Example 1: Personal expenditure
A taxpayer earns bank interest and incurs personal travel expenses. Those travel expenses cannot reduce taxable interest income merely because the interest was used to fund the travel.
Example 2: Tax deduction on an overseas payment
Where interest payable outside India is subject to withholding but the required tax is neither paid nor deducted, Section 58 may prevent deduction of that interest, subject to the relevant facts and law.
Example 3: Lottery winnings
A person wins a lottery and spends money on tickets. The ticket cost cannot be deducted against the lottery winnings under Section 58(4).
Historical amendments and original notes
The earlier webpage contained amendment references that remain useful for historical research. They should not be mistaken for a fully consolidated current statutory text.
Show historical amendment notes retained from the original webpage
1. Section 58 renumbered as sub-section (1) thereof by Act 19 of 1968, s.8 (w.e.f. 1-4-1968). 2. Ins. by Act 32 of 1985, s. 15 (w.e.f. 1-4-1986). 3. The words "and in respect of which there is no person in India who may be treated as in agent under section 163" omitted by Act 26 of 1988, s. 20 (w.e.f. 1-4-1989). 4. Clause (iv) omitted by Act 32 of 1971, s. 12 (w.e.f. 1-4-1972). 5. Clause (b) omitted by Act 26 of 1988, s. 20 (w.e.f. 1-4-1989). 6. Ins. by Act 41 of 1972, s. 3 (w.e.f. 1-4-1962). 7. Subs. by Act 7 of 2017, s. 30, for "sub-clauses (iia) (w.e.f. 1-4-2018). 8. Ins. by Act 19 of 1968, s. 8 (w.e.f. 1-4-1968). 9. Ins. by Act 66 of 1976, s. 14 (w.e.f. 1-6-1976). 10. Ins. by Act 23 of 1986, s. 14 (w.e.f. 1-4-1987).
Official statutory sources and related provisions
- Income Tax Department - Section 58, Income-tax Act, 1961
- Income Tax Department - Income-tax Act, 2025 (as amended)
- Income Tax Department - Various deductions and disallowances
- Section 56 - Income from other sources
- Section 57 - Deductions
This article is a general explanation, not a substitute for the enacted statutory text, applicable rules or professional advice for a particular tax year.