Guide: Income from Other sources and Taxes

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Hiral Vakil

Dividend Income
Income Interest
Income Source
TDS

What is Income from Other Sources?

Income from Other Sources is the residual head of income. Hence, any income which is not specifically taxed under any other head of income will be taxed under this head. Further, there are certain incomes which are always taxed under this head.

These incomes are as follows:

This is an inclusive list and not an exhaustive list. Please note that Agricultural income is exempt from tax so it will not fall under any of the heads of income. It will be mentioned as exempt income while e-filing the Income Tax Return.

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

ITR Documents : Income from other sources
Document Checklist for Income From Other Source
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ITR Documents : Income from other sources
Document Checklist for Income From Other Source
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Taxability of Income from Other Sources

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:

Taxability of Gifts:

Gifts can mainly be classified under following categories:

Gifts will be completely taxable under the head income from other sources with following exceptions:

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

*Relatives for this purpose means:

a.) Spouse of the individualb.) Brother or sister of the individual
c.) Brother or sister of the spouse of the individuald.) Brother or sister of either of the parents of the individual
e.) Any lineal ascendant or descendent of the individualf.) Any lineal ascendant or descendent of the spouse of the individual
g.) Spouse of the person referred to in (b) to (f)

Tax Treatment of Amount received from Life Insurance Policy:

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

Let’s take a look at a scenario for better understanding:

Pratik has taken a Life Insurance policy on 15th December 2014. Total sum assured is Rs. 50,00,000 and annual premium is Rs. 82,000. The policy will mature in the year 2026 and the maturity amount will be Rs. 10,00,000.

Tax Treatment for Dividend Income:

Tax Treatment for Interest Income:

Taxability of interest income may vary, depending on the nature of interest income.

Earned Income From Other Sources
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Can I claim any expenses from incomes under this head?

Yes, following are some of the deductions available from income chargeable to tax under the head 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 upto an aggregate of Rs. 50,000 in a Financial year. Total value of gifts over and above Rs. 50,000 will be taxable under the head ‘Income from Other Sources’. Gifts received on the occasion of marriage are exempt from thax. Read here to know more about Gifts and thier taxability.

Can I claim any deductions on family pension?

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

Is lottery prize taxable?

Yes, lottery winnings are liable to 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.

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