Section 57 Income Tax Deductions Explained
Section 57 of the Income-tax Act, 1961 governed deductions while computing taxable income under the head "Income from other sources". From 1 April 2026, the Income-tax Act, 2025 applies for Tax Year 2026-27 and the corresponding deduction provision is section 93. This article explains the legacy Section 57 rules and the current-law transition in plain language.
What did Section 57 of the Income-tax Act, 1961 provide?
Section 57 prescribed deductions that could be claimed while computing income taxable under the head "Income from other sources". The deduction depended on the nature of the receipt. It was not a general permission to deduct every expense connected with personal income.
Section 56 identified income chargeable under the head "Income from other sources", while Section 57 specified permitted deductions and Section 58 restricted specified deductions. These provisions therefore had to be read together.
Main deductions under legacy Section 57
| Provision | Nature of income | Deduction under the 1961 Act |
|---|---|---|
| Section 57(i) | Specified dividend or interest on securities | A reasonable commission or remuneration paid to a banker or other person for realising the eligible receipt, subject to the specific statutory restrictions applicable to dividend income. |
| Section 57(ia) | Employees' contribution income covered by Section 2(24)(x) | Deduction was linked to the conditions in Section 36(1)(va), including deposit into the relevant employee welfare fund within the statutory due date. |
| Section 57(ii) | Letting of machinery, plant or furniture, including inseparable letting with a building | Specified deductions corresponding to repairs, insurance, depreciation and related provisions, subject to the sections cross-referred to in the Act. |
| Section 57(iia) | Family pension | One-third of family pension or Rs. 15,000, whichever was lower. Where tax was computed under the specified new-regime provision of Section 115BAC, the monetary ceiling became Rs. 25,000 from AY 2025-26. |
| Section 57(iii) | Other eligible income | Non-capital expenditure laid out or expended wholly and exclusively for making or earning that income. |
| Section 57(iv) | Interest on compensation or enhanced compensation covered by Section 56(2)(viii) | 50% of that income; no deduction was allowed under another clause of Section 57 against the same income. |
Meaning of "wholly and exclusively" under Section 57(iii)
The expenditure must have a direct purpose of making or earning the relevant income and must not be capital expenditure. A personal expense does not become deductible merely because the taxpayer has income under "other sources". The factual connection between the expense and the earning of the income remains important.
Family pension deduction
For the legacy 1961 Act, "family pension" for this purpose meant a regular monthly amount payable by an employer to a person belonging to the family of an employee after the employee's death.
Under Section 57(iia), the ordinary ceiling was one-third of the family pension or Rs. 15,000, whichever was lower. From AY 2025-26, where income-tax was computed under Section 115BAC(1A)(ii), the Rs. 15,000 ceiling was increased to Rs. 25,000.
Example: If eligible family pension was Rs. 90,000 and the applicable ceiling was Rs. 25,000, one-third was Rs. 30,000, so the deduction was restricted to Rs. 25,000. If the applicable ceiling was Rs. 15,000, the deduction was Rs. 15,000.
Dividend and mutual fund income
Under the later version of Section 57 of the 1961 Act, deduction from specified dividend and mutual fund unit income was tightly restricted. Broadly, only qualifying interest expense could be considered, subject to a ceiling of 20% of the relevant gross income. Special restrictions also applied to specified dividend income.
For Tax Year 2026-27 under the Income-tax Act, 2025, the law changed further: the current Section 93 framework does not allow the earlier interest deduction against dividend income or income from specified mutual fund units. Taxpayers should therefore identify the applicable Act and tax period before relying on the old 20% rule.
Section 93 of the Income-tax Act, 2025
The Income-tax Act, 2025 reorganised and simplified the provisions. The subject previously dealt with by Section 57 is now principally covered by Section 93 for Tax Year 2026-27 onward. The new provision continues category-specific deductions for eligible income from other sources, including rules for family pension and specified expenditure, while using the section numbering and terminology of the 2025 Act.
Related provisions
Readers may also refer to Section 56 - Income from other sources and Section 58 - Amounts not deductible. These provisions help determine what is taxable and which expenses cannot be deducted.
Official income-tax resources
Income Tax e-Filing Portal Income Tax Department - Acts, Rules and Tax Information
Last reviewed: 28 September 2026. Tax treatment can depend on the relevant tax year, the nature of the receipt and the taxpayer's applicable regime.