Income from Other Sources (IFOS)

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Hiral Vakil

Dividend Income
Income Interest
Income Source
TDS
Last updated on February 6th, 2024

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

Incomes covered under IFOS

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

This is an inclusive list and not an exhaustive list.

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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 on Commission Income

If the broker or any other insurance company has paid you any commission or brokerage, and it is not part of your business, this income can also be categorized as income from other sources. The income will be taxable at a slab rate which applies to individual assessee.

For example: Sanjay, being a salaried individual, has received brokerage income from Zerodha for referring friends. Since he doesn’t have a brokerage business, this income can be reported as income from other sources.

Exempt Income

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

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

Yes, As per Section 57 of the Income-tax Act, 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’.

As per the Finance Act 2020, A taxpayer can claim a deduction of interest expenses for earning a dividend income. Interest on money borrowed for investing in the shares can be claimed as a deduction subject to a maximum of 20% of dividends or income in respect of units of a mutual fund.

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.