Taxation Essentials: Income Sources, GST Supply, and Article 246A

Posted on May 20, 2026 in Accounting and Finance

Income from Other Sources: Residual Head of Income

The residual head of income refers to “Income from Other Sources” under the Income Tax Act, 1961. It includes incomes that are not taxable under the other four heads of income, such as salary, house property, business/profession, or capital gains. It is governed by Section 56 of the Income Tax Act.

Examples of Income from Other Sources

  • Dividend income
  • Interest on bank deposits and securities
  • Family pension
  • Lottery and crossword winnings
  • Gifts received from non-relatives exceeding ₹50,000
  • Rent from machinery or furniture

Deductions Allowed (Section 57)

Certain expenses incurred for earning such income are deductible, such as:

  • Commission for collecting interest/dividend
  • Deduction from family pension
  • Repairs and insurance of machinery let out

Illustration

Mr. X earned:

  • Bank interest: ₹20,000
  • Dividend: ₹10,000
  • Lottery winning: ₹30,000

Total income from other sources: ₹20,000 + ₹10,000 + ₹30,000 = ₹60,000. Thus, ₹60,000 is taxable under the residual head “Income from Other Sources.”

Time of Supply under CGST Act, 2017

The time of supply determines when GST liability arises, affecting the tax rate, due date, and return period.

Goods (Section 12(2))

The earliest of:

  • Invoice date
  • Last date to issue invoice under Section 31
  • Payment date

Services (Section 13(2))

The earliest of:

  • Invoice date (if issued within 30 days of supply; 45 days for banks/FIs)
  • Date of service (if invoice is issued late)
  • Payment date

Reverse Charge (Section 12(3) & 13(3))

  • Goods: Receipt of goods, payment, or 30 days after invoice (earliest).
  • Services: Payment or 60 days after invoice (earliest).

Other Provisions

  • Continuous Supply: Due date of payment as per contract, or payment date if no due date exists.
  • Vouchers: If supply is identifiable, use voucher issue date; otherwise, use redemption date.
  • Rate Change (Section 14): If two out of three events (supply, invoice, payment) occur before the change, the old rate applies. If two occur after, the new rate applies.
  • Advance Payments: GST on advances is payable at the time of receipt (Exception: Goods advance is exempt for turnover under ₹1.5 Cr).

Value of Supply under CGST Act, 2017

Value of Supply is the amount on which GST is charged, determined as per Section 15. It ensures tax is paid on the actual transaction price.

Section 15 Valuation Rules

  • Transaction Value (Sec 15(1)): Price actually paid or payable. Applies if the supplier and recipient are not related and price is the sole consideration.
  • Additions (Sec 15(2)): Include taxes other than GST (e.g., TCS), incidental expenses (packing, freight), amounts paid by the recipient on behalf of the supplier, interest/late fees, and non-government subsidies linked to price.
  • Deductions (Sec 15(3)): Exclude discounts given before/at supply (shown in invoice) or post-supply discounts (per prior agreement where buyer reverses ITC).
  • Related Parties (Sec 15(4)): If parties are related or price is not the sole consideration, use valuation rules (Open Market Value, Cost + 10%, etc.).

Note: GST is not included in the value. Expenses paid by a “Pure Agent” are excluded per Rule 33.

Legislative Intent of Article 246A

Article 246A was inserted by the 101st Constitution Amendment, 2016, to enable the implementation of GST.

Key Objectives

  • Break the Deadlock: Original Article 246 prevented both Centre and State from taxing the same transaction.
  • Concurrent Power: Article 246A(1) empowers both Parliament and State Legislatures to tax intra-state supply (Dual GST: CGST + SGST).
  • Inter-state Power: Article 246A(2) grants Parliament exclusive power to tax inter-state supply (IGST).
  • End Cascading Taxes: Replaces excise, VAT, and service tax with a unified tax on supply.
  • Cooperative Federalism: Enables Centre and States to jointly tax the same base via the GST Council.

Summary: Article 246A constitutionally allows both Centre and States to simultaneously levy GST, facilitating the “One Nation, One Tax” framework.