Deductions not allowable [Section 58] :
No deduction shall be made in computing the “Income from other sources” of an assessee in respect of the following items of expenses:
(i) In the case of any assessee:
(1) any personal expense of the assessee;
(2) any interest chargeable to tax under the Act which is payable outside India on which tax has not been paid or deducted at source.
(3) any payment taxable in India as salaries, if it is payable outside India unless tax has been paid thereon or deducted at source.
(ii) In addition to these disallowances, section 58(2) specifically provides that the disallowance of payments to relatives and associate concerns and disallowance of payment or aggregate of payments exceeding Rs 20,000 made to a person during a day otherwise than by account payee cheque or draft covered by section 40A will be applicable to the computation of income under the head ‘Income from other sources‘ as well.
(iii) Income-tax and wealth-tax paid.
(iv) No deduction in respect of any expenditure or allowance in connection with income by way of earnings from lotteries, cross word puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever shall be allowed in computing the said income.
The prohibition will not, however, apply in respect of the income of an assessee, being the owner of race horses, from the activity of owning and maintaining such horses. In respect of the activity of owning and maintaining race horses, expenses incurred shall be allowed even in the absence of any stake money earned. Such loss shall be allowed to be carried forward in accordance with the provisions of section 74A.