2 Nov 2022
Section 57 of the Income Tax Act 1961
Section 57 of the act provides that while calculating IFOS, some deductions are allowed, namely :—
In the case of dividends (other than dividends referred to in section 115-O) or income on units of MF/UTI, only interest expenses is allowed as deduction upto 20% of such dividend or income on units of MF/UTI
In case of interest on securities, any reasonable sum paid by way of commission or remuneration paid to any person for the purpose of realizing such income on behalf of the taxpayer(assessee)
In the case of income in the nature of family pension, deduction will be made
sum equal to 1/3rd of such income or
Rs 15000 p.a.
whichever is less.
*Here as per Income tax Act 1961 "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.
Any other expenditure ,not in the nature of capital expenditure, laid out or expended wholly and exclusively for the purpose of making or earning such income.
In case of income by way of interest received on compensation or on enhanced compensation, deduction will be made -
sum equal to 50% of such income and no deduction shall be allowed under any other clause of this section.
In case of rental income from plant and machinery or furniture, amount paid for repair, insurance and normal depreciation are allowed as expenses.
Additional proviso has been added in this section by FA 2020 that no additional deduction shall be allowed from the dividend income, or income in respect of units of a Mutual Fund specified u/s 10 (23D) or income in respect of units from a specified company defined in the Explanation to section 10(35)
other than deduction on account of interest expense,
and in any previous year such deduction shall not exceed twenty per cent of the such income, included in the total income for that year, without deduction under this section..
Section 58 of the Income Tax Act 1961
Section 58 of the act explains that there are some expenses which are for which deduction is not available. This section prohibits some nature of expenses for which are not eligible to claim as deduction.
Some of the following expenses mentioned in section 58 is as follows :
Interest chargeable to tax which is payable outside India on which tax has not been paid or deducted at source.
Salaries’ payable outside India on which no tax is paid or deducted at source.
Expenditure of the nature specified in section 40A.
Expenditure in connection with winnings from lotteries, crossword puzzles, races, games, gambling or betting.
Expenses specified in section 40A were disallowed (nature specified in sec 40 A) provided with some conditions. Some of them were as follows :
Where the assessee incurs any expenditure in respect of which payment has been or is to be made to relative of assessee, and the AO is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction.
Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than prescribed mode (electronic mode), exceeds Rs 10000, no deduction shall be allowed in respect of such expenditure.
While during assessment, allowance has been made in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than prescribed mode (electronic mode), the payment so made shall be deemed to be the PGBP Gain and accordingly chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day, exceeds Rs 10000.
Also in the case of payment made for plying, hiring or leasing goods, carriages limit will be Rs 35000.
No deduction shall be allowed in respect of any provision (whether called as such or by any other name) made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason.
No deduction shall be allowed in respect of any sum paid by the assessee as an employer towards the setting up or formation of, or as contribution to, any fund, trust, company, AOP, BOI, registered societies under the relevant act or other institution for any purpose, except where such sum is so paid, for the purposes and to the extent provided by orsome clause of sec 36(1), or as required by or under any other law for the time being in force.
No deduction or allowance shall be allowed in respect of any marked to market loss or other expected loss, except as allowable u/s 36
Some FAQs on section 57 & 58
How much deduction will be available in case pension received on a monthly basis??
Deduction will be available on amount received annually
Is there a difference between Pension and Family Pension??
Yes, Pension is considered as a part of the salary income of the employee who is getting pension due to his employment agreement while family pension is considered as other income as it is received by the family of the employee after his death.