Income From other Sources - Meaning, Tax, Deductions & Exemptions
Updated on : Feb. 18, 2023 - 1 p.m. 17 min read.
What is Income from Other Sources?
Under the Income Tax Act, The Income Tax Department breaks down income into five heads of income for the purpose of income tax reporting and One of these head is - 'Income from other sources'. Income earned under this head does not include the income you might earn from the 4 other income heads – income from salary, income from house property, income from business or profession and income from capital gains.
Heads of Income
- Income from Salary
- Income from House Property
- Income from Capital Gains/Loss
- Profits and Gains from Business and Profession
- Income from Other Sources
Tax Rates and Rules for Income from Other Sources
Depending on the type of income, the tax treatment of income from other sources can vary. For example, income received from lottery winnings, horse races and other types of betting is taxed at a flat rate of 30% plus applicable cess. The income tax slab of the taxpayer has no impact in this case.
On the other hand, dividend income from shares and/or mutual funds is taxable as per the income tax slab rate of the individual for the applicable financial year. Similarly, there are different rules for taxation of other types of income from other sources received by an individual.
Examples of Income from Other Sources
Depending on the company's residential status, dividends are subject to taxation as income from other sources.
- Dividend from an Indian company: The dividend is tax-free if the company has paid Dividend Distribution Tax. Under section 115BBDA of the income tax act, however, if an individual/HUF/firm receives dividends from Indian companies that exceed ₹ 10 lahks, the excess is taxable at 10%.
- Dividend from a foreign company: Dividends received from foreign companies are taxed as income from other sources.
2. One-time Income
A one-time income such as winnings from lotteries, crossword puzzles, horse races, card games, or betting of any kind is considered income from other sources.
3. Savings Bank Account – Interest Income
Interest that gets accumulated in your savings bank account must be declared in your tax return under income from other sources. Do note that the bank does not deduct TDS on savings bank interest. Interest from both fixed deposit and recurring deposits is taxable while interest from a savings bank account and post office deposits are tax-deductible to a certain extent. But they are shown under income from other sources. Interest income from a savings bank account or a fixed deposit or from a post office savings account are all shown under this head.
Gifts such as any sum of money and movable or immovable property that’s received without consideration which exceeds ₹50,000 are taxable.
However, any sum of money or value of property received, in the following circumstances would be tax-free:
- From any relative; or
- On the occasion of the marriage of the individual; or
- Under a will or by way of inheritance; or
- In contemplation of the death of the payer or donor, as the case may be; or
- From any local authority; or
- From any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution; or
- From or by any trust or institution registered; or
- By any fund or trust or institution or any university or other educational institution or any hospital or other medical institution
When a person receives compensation in connection with the termination of his employment or the modification of his terms and conditions.
6. Family Pension
If you are collecting a pension on behalf of someone who is deceased/dead, then you must show this income under income from other sources. There is a deduction of Rs 15,000 or one-third of the family pension received whichever is lower than the Family Pension Income. This will be added to the taxpayer’s income and tax must be paid at the tax rate that is applicable.
Examples of Incomes Chargeable as "Income from Other Sources"
Here are some examples of other receipts that automatically fall under this category.
- Income from subletting of a house property by a tenant
- Casual income
- Insurance commissions received by the assessee
- Family pension payments received by the legal heirs of dead employees
- Interest on bank deposits and deposits with companies
- Interest on loans given
- Remuneration received by Members of Parliament
- Rent earned from a vacant plot of land
- Agricultural income from agricultural land situated outside India
- Interest paid by the Government on excess payment of advance tax