Section 58: Amounts Not Deductible from “Income from Other Sources”

Income from Other Sources, Tax Ready Reckoner

Table of Contents

1. Overview of Section 58

Section 58 specifies expenses that cannot be deducted while computing taxable income under the head “Income from Other Sources”, even if they are incurred to earn such income. This ensures strict compliance with tax laws and prevents misuse of deductions.

2. Key Non-Deductible Expenses

CATEGORY	DESCRIPTION	RELEVANT CLAUSE
Personal Expenses	Expenses not wholly/exclusively for earning income (e.g., personal travel).	Section 58(1)(a)(i)
Capital Expenditures	Costs incurred to acquire/improve assets (e.g., buying machinery for rentals).	Section 58(1)(a)(ii)
Wealth Tax Payments	Any wealth tax paid (abolished post-2015 but still relevant for past years).	Section 58(1A)
Interest/Salary Abroad	Payments to non-residents without TDS deduction.	Section 58(2)
Penalties & Fines	Legal penalties (e.g., late fees, traffic challans).	Section 58(1)(a)(i)
Lottery/Gambling Losses	Losses from betting, horse races, or lotteries (even if winnings are taxed).	Section 58(4)

3. Special Cases

Dividend Income: No deduction for expenses (except interest up to 20% under Section 57(iii)).
Family Pension: Only standard deduction (₹15,000 or 1/3rd of pension) allowed.
Interest on Compensation: 50% deduction allowed under Section 57(iv).

4. Judicial Interpretations

CIT vs. Rajendra Prasad Moody (1978): Confirmed that personal expensesare inadmissible even if indirectly linked to income.
ITAT Delhi Ruling (2021): Upheld disallowance of capital expensesfor rental income computations.

5. Compliance Tips

Maintain Records: Separate personal and income-earning expenses.
Verify TDS: Ensure tax is deducted on foreign payments to claim deductions.
Avoid Penalties: Disallowed expenses may attract scrutiny under Section 143(1).

Example: