Deductions Allowed from Income from Other Sources – myITreturn Help Center

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Income from Other Sources is the residual head used for taxable income that does not fall under salary, house property, business or profession, or capital gains. A deduction is available only when a specific provision permits it and the expense has the required connection with the income.

Evidence and purpose matter

An expense is not deductible merely because it was paid from the same bank account or relates broadly to an investment. The statutory test and specific restrictions must be satisfied.

Main deductions for AY 2026-27

Nature of income	Deduction under section 57—1961 Act	Key limit or condition
Interest on securities	Reasonable commission or remuneration paid to a banker or other person to realise the interest	Must be incurred for realisation of interest
Letting of machinery, plant or furniture; inseparable building letting	Specified repairs, insurance and depreciation provisions	Subject to sections 30, 31, 32 and 38
Family pension	One-third of family pension or ₹15,000, whichever is lower; ₹25,000 cap under default new regime	Family pension is different from the employee’s own pension
Other income	Revenue expenditure laid out wholly and exclusively to earn the income	No capital or personal expenditure
Interest on compensation or enhanced compensation	50% of that interest	No other deduction against this interest
Dividend and specified unit income	Interest expense only, capped at 20% of income	AY 2026-27 rule only

Family pension

Family pension received after an employee's death is taxable under Income from Other Sources. For AY 2026-27, the deduction is:

old regime: one-third of family pension or ₹15,000, whichever is lower;
default new regime: one-third of family pension or ₹25,000, whichever is lower.

The employee's own retirement pension is generally taxed under Salary and can qualify for the salary standard deduction instead.

Dividend deduction changes from 1 April 2026

For AY 2026-27, section 57 allows only interest expense, up to 20% of dividend or specified unit income. Under section 93(2) of the Income-tax Act, 2025, as amended by Finance Act, 2026, no deduction is allowed from dividend or specified unit income for Tax Year 2026-27.

Expenses that are not deductible

Personal or household expenses.
Capital expenditure, such as the purchase price of an investment.
Income tax, interest under the tax law or penalties.
Expenditure against lottery, betting, gambling, online game or similar winnings.
Expenses not supported by records or not incurred wholly and exclusively to earn the income.
Payments for which TDS compliance is required but has not been completed, where the disallowance provisions apply.

Provision	Income-tax Act, 1961	Income-tax Act, 2025
Residual charging head	Section 56	Section 92
Permitted deductions	Section 57	Section 93
Amounts not deductible	Section 58	Section 94
Online-game and other winnings restrictions	Section 58(4) and special provisions	Section 94(4) and special provisions

Examples

Family pension: If family pension is ₹72,000, one-third is ₹24,000. The deduction is ₹15,000 under the old regime and ₹24,000 under the default new regime because it is lower than the ₹25,000 ceiling.

Enhanced compensation interest: If taxable interest is ₹2,00,000, the prescribed deduction is ₹1,00,000 and the balance ₹1,00,000 is taxable.

General expenditure: A fee paid solely for collecting taxable interest may qualify if it is revenue expenditure and properly evidenced. A portfolio subscription used for general investment advice is not automatically deductible.

ITR reporting procedure

Classify each receipt in Schedule OS.
Enter the gross income before deducting expenses or TDS.
Enter each permitted deduction in the relevant field with the statutory cap.
Keep invoices, agreements, bank statements and a clear earning-purpose note.
Claim TDS separately and reconcile the net taxable amount with AIS and Form 26AS.

Different deduction stages

Do not combine Chapter VI-A deductions such as 80C, 80D or 80TTB with section 57 expenses. They operate at different stages of the tax computation and may be unavailable in the default new regime.

Conclusion

Start with the gross receipt, identify the exact statutory deduction, apply the limit, and retain evidence showing that the expense was incurred to earn the income.

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