Income from Other Sources and Taxes (IFOS): Guide

author portrait

Hiral Vakil

Dividend Income
Income Interest
Income Source
TDS
Last updated on September 21st, 2023

Income from Other Sources is one of the five heads of income. Any income which is not specifically taxable under any other head of income will be taxable under IFOS. For e.g., Gifts, dividends, etc., are taxable under IFOS.

Which Income Sources does IFOS Cover?

The following are some of the income sources that are taxable under the head ‘income from other sources-(IFOS)’.

This is an inclusive list and not an exhaustive list.

Income Tax Calculator
Determine your tax liability for FY 2022-23. Compare tax liability as per New v/s Old Tax Regime
Explore
Income Tax Calculator
Determine your tax liability for FY 2022-23. Compare tax liability as per New v/s Old Tax Regime
Explore

In addition to the above, the following incomes are charged to tax under this head, if not taxed under the head “Profits and Gains of Business or Profession.”

Taxability of Income from Other Sources (IFOS)

The taxability of incomes falling under this head may differ as per their nature. Let’s have a look at the tax treatment on some of these incomes:

Gift Tax: Taxability on Gifts

Gifts can mainly be classified under the following categories:

Gifts will be taxable under the head income from other sources as per the slab rates.

However, below are the following exceptions:

  1. Gifts will be exempt if the aggregate value received during a financial year does not exceed INR 50,000.
  2. Any property received without consideration and the total fair market value of such properties received throughout the year does not exceed INR 50,000.
  3. Gifts received from relatives:
    • On the occasion of the marriage.
    • Under will/by way of inheritance.
    • In contemplation of the death of the payer.
    • From local authority.
    • A fund, foundation, university, other educational institution, hospital, or any trust or institution defined in Section 10(23C).
  4. The amount received from a charitable trust registered under Section 12AA.

Tax Treatment on Life Insurance Policy

Any amount received under a Life Insurance policy, including any bonus amount, is exempt from tax under section 10(10D) of the Income Tax Act. However, a few important points to be noted with regard to this exemption:

Let’s take an example to understand the same:

Pratik has taken a Life Insurance policy on 15th December 2014. The total sum assured is INR 50,00,000 and the annual premium is INR 82,000. The policy will mature in the year 2026 and the maturity amount will be INR 70,00,000.

Tax on Dividend Income

Tax on Interest Income

The taxpayer is entitled to pay tax on FD interest income and recurring deposits. Furthermore, if the total interest income from such sources exceeds INR 10,000, then the banks will deduct the TDS @ 10%. (@ 20% if the PAN is not provided).

The taxpayer is entitled to pay tax on savings bank account interest and post office deposits. However, they are tax deductible u/s 80TTA/80TTB to a certain limit.

Tax Exempt Interest Income

Below interest income are completely exempt in the hands of taxpayers:

Find the best plan
Find the best plan
GET EXPERT HELP
Find the best plan
Find the best plan

Can I claim any expenses from Incomes from Other Sources (IFOS)?

Yes, the following are some of the deductions available from income chargeable to tax under the head Income from Other Sources:

Note: No personal expenditure shall be allowed to be deducted from income chargeable under the head ‘Income from Other Sources’.

What tax deduction cannot be claimed under Income From Other Sources?

According to section 58 of the Income Tax Act, the following are deductions that can not be claimed during the computation of Income from Other Sources;

FAQs

Is gift taxable as other income?

Gifts from relatives are exempt and any gifts received from non-relatives are exempt up to an aggregate of INR 50,000 in a Financial year. Hence, the total value of gifts over and above INR 50,000 will be taxable under the head ‘Income from Other Sources’.

Can I claim any deductions on the family pension?

As per Income Tax Act, you can claim a standard deduction of 1/3rd of the amount of the family pension received subject to a maximum of INR 15,000 annually.

Is the lottery prize taxable?

Yes, lottery winnings are liable to a flat rate of tax at 30% without any basic exemption limit. Thus in such a case the payer of prize money will generally deduct tax at source (i.e., TDS) from the winnings and will pay you only the balance amount.

Is dividend income taxable?

Yes, dividend income is fully taxable under IFOS.