Chapter IV - Computation of Total Income
Section 93
Section 93: deductions against income from other sources
Section 93 sets out deductions when computing income from other sources. It covers specified collection costs, letting-related deductions, family pension, and a 50% deduction for interest on compensation or enhanced compensation referred to in section 92(2)(i). The amended subsection (2) bars deductions for its specified dividend and unit-income categories.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) The income chargeable under the head “Income from other sources” shall be computed after making the following deductions:— (a) for interest on securities, any reasonable sum paid as commission or remuneration to a banker or any other person for the purpose of realising such interest on behalf of the assessee; (b) for income of the nature referred to in section 92(2)(c), so far as may be, an amount as per section 29(1)(e); (c) for income of the nature referred to in section 92(2)(f) and (g), so far as may be, an amount as per section 28(1)(a), (b), (d), section 33, and subject to the provisions of section 28(2); (d) for income in the nature of family pension (a regular monthly amount payable by the employer to a family member of an employee upon the death of such employee),— (i) an amount equal to one-third of such income or ₹25000, whichever is less, where income-tax is computed under section 202(1); and (ii) an amount equal to one-third of such income or ₹15000, whichever is less, in any other case; (e) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for making or earning such income; (f) for income of the nature referred to in section 92(2)(i), an amount equal to 50% of such income and no other deduction shall be allowed under this section; (g) for income in the nature of commutation of pension received from a fund as specified in Schedule VII (Table: Sl. No. 3), the entire amount; (h) for income in the nature of gratuity as referred in section 19(2)(g), received on the death of the employee, the entire amount.
(2) Irrespective of anything contained in sub-section (1), in respect of any dividend income or income from units of a Mutual Fund specified under Schedule VII (Table: Sl. No. 20 or 21) or income from units of a specified company as referred to in section 2(h) of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002), no deduction shall be allowed.
Introduction
Section 93 identifies deductions while computing income from other sources, with different rules for different receipt types. The allowable deduction must be tied to the specific income category and its statutory conditions.
Key takeaways
Other-source deductions
This section allows the specified expenses and allowances against income chargeable under 'Income from other sources', subject to the conditions for each income type.
Dividend restriction
As amended by Finance Act, 2026, no deduction is allowed against the specified dividend and mutual-fund income categories covered by subsection (2).
What can be deducted
In computing income from other sources, the following deductions are allowed: reasonable commission or remuneration paid to a banker or other person to realise interest on securities; for employee-welfare-fund contributions taxed under this head, an amount computed the same way as under Section 29(1)(e); for income from letting machinery, plant, furniture (with or without buildings), amounts computed the same way as under Section 28(1)(a), (b), (d), Section 33, subject to Section 28(2); and any other expenditure (not of a capital nature) laid out or expended wholly and exclusively for making or earning that income.
Standard deduction for family pension
| Situation | Deduction |
|---|---|
| Family pension where tax is computed under Section 202(1) | One-third of the family pension income, or ₹25,000, whichever is less |
| Family pension in any other case | One-third of the family pension income, or ₹15,000, whichever is less |
50% deduction for interest on compensation
Section 93(1)(f) allows a deduction equal to 50% of income of the nature referred to in section 92(2)(i). That cross-reference means interest on compensation or enhanced compensation referred to in section 278(1). No other deduction is allowed for that income under section 93.
Employment-termination or employment-terms compensation is listed separately in section 92(2)(j). It is not the income category named by this 50% deduction clause.
Entire-amount deductions for specified pension and death gratuity
Income in the nature of commutation of pension received from a fund specified in Schedule VII (Table: Sl. No. 3) is fully deductible - the entire amount. Similarly, gratuity received on the death of an employee (as referred to in Section 19(2)(g)) is fully deductible - the entire amount.
No deduction for dividend and mutual fund income
Current subsection (2) disallows deductions for any dividend income, income from units of the specified mutual funds in Schedule VII (Table: Sl. No. 20 or 21), and income from units of a specified company referred to in section 2(h) of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002.
Step-by-step flow for applying Section 93
- 1
Is the income dividend or specified mutual fund or UTI income?
- Yes: No deduction is allowed (Section 93(2)).
- No: Go to the next step.
- 2
Is it family pension?
- Yes: Deduct one-third or ₹25,000 (whichever is less) under the Section 202(1) regime, or one-third or ₹15,000 (whichever is less) otherwise.
- No: Go to the next step.
- 3
Is it interest covered by Section 92(2)(i)?
- Yes: Deduct 50% and nothing else (Section 93(1)(f)).
- No: Go to the next step.
- 4
Is it hire income from plant, machinery or furniture, or interest on securities?
Allow repairs, insurance, depreciation and taxes as per Sections 28 and 33 for hire income, and reasonable banker's commission for collecting interest on securities.
- 5
Any other revenue expense laid out wholly and exclusively to earn the income?
Deductible under Section 93(1)(e).
Practical checklist
Do
- Classify the receipt, then match it to the relevant subsection before deducting expenses or a standard amount.
- Keep evidence of expenses incurred wholly and exclusively to earn the relevant income where that test applies.
Avoid
- Do not carry a deduction permitted for family pension into another kind of other-sources income.
- Do not claim deductions against dividend or specified mutual-fund income where subsection (2) disallows them.
- Do not apply the interest-on-compensation deduction to the compensation principal or to employment-termination compensation merely because it is called compensation.
Illustrative example
Worked example: family pension under the default regime
Hypothetical facts (illustration only, not a real taxpayer): Mrs. Sen receives family pension of ₹2,40,000 in the tax year after her husband's death. She is taxed under Section 202(1).
One-third
One-third of ₹2,40,000 = ₹80,000.
Cap
Under the Section 202(1) regime the cap is ₹25,000.
Deduction
The lower amount, ₹25,000, is deducted.
Outcome
- Taxable family pension = ₹2,15,000.
- Under the other regime, the cap would be ₹15,000.
Glossary
- Family pension
- A pension received by a family member that has a specific deduction rule under this section.
- Wholly and exclusively
- A statutory link requiring spending to be for earning the relevant income.
Frequently asked questions
What is the standard deduction for family pension under Section 93?
One-third of the family pension, capped at ₹25,000 where tax is computed under Section 202(1), or capped at ₹15,000 in any other case.
Which compensation-related income receives the 50% deduction?
The deduction under section 93(1)(f) is for interest on compensation or enhanced compensation within section 92(2)(i), which refers to section 278(1). It does not name employment-termination compensation under section 92(2)(j). No other deduction under section 93 is allowed against the covered interest income.
Can I deduct expenses against dividend income under Section 93?
No - Section 93(2) specifically disallows any deduction against dividend income and income from certain specified mutual fund/UTI units.
Is commuted pension from any fund fully deductible?
Only commuted pension received from a fund specified in Schedule VII (Table: Sl. No. 3) is fully deductible under Section 93.
Need help applying this provision to your situation?
Get help claiming the right deductions on other-source incomeLast updated 10 October 2026