Income from other sources under Income tax act is the head of the income which is unidentified or such income which can consider all the different sources of income that do not fall under other heads such as income from salary, or house property or capital gains.
ITR Form I – VI, there is a separate column specified for the income from other sources.
What is Income from other sources?
Income from other sources is the nature of income which is not suitable for any other head of income which is taxable.
Filling Income tax return there is three categories you must require to disclose the details.
- Income from salary/Pension
- Capital Income (Long term capital gain or Short term capital gain)
- Other Sources Income.
There are multiple other incomes, some are taxable under different tax slab under different conditions and some are non-taxable.
It is very difficult for the taxpayer to select the proper head during disclosure of income.
In this article, we will understand the taxation and heads of Income from other sources under income tax act.
List of Income from other sources
- Dividend Income
- Onetime Income
- Interest from Securities
- Income from machinery, plant or furniture
- Rental Income
- Sum of money or property received by an individual
- Any Compensation from Employer
- Any Advance received
Income from other sources examples
- Interest on saving bank account, bank deposits (fixed, recurring), loans or company deposits,
- Family pension (received by legal heirs of an employee)
- Dividend: Dividend is the payment made by a company to its shareholders or members out of the profit earned by the company.
- Any sum exceeding ₹ 50,000 received without consideration shall be treated as income provided that the sum of money is not received from any relative or on the occasion of the marriage of the individual or under a will or inheritance etc.
- Interest received from the IT Dept.
- Examiner-ship fees received by a teacher (not from the employer),
- Income from royalty,
- Insurance commission,
- Income from sub-letting of house property by a tenant,
- Agricultural income from agricultural land situated outside India,
- Remuneration received by Members of Parliament,
- Casual receipts and receipts of non-recurring nature,
- Director’s commission for standing as guarantor to bankers,
- Winnings from Lotteries, Crossword Puzzles, Horse Races, and Card Games,
- Interest on securities,
- Income from letting out of machinery, plant or furniture, etc.
It is recommended to all the taxpayers to prepare a proper Income from other sources notes that will provide a proper amount to disclose.
Income from other sources examples
There are few examples of income from other sources.
Income from Dividend
We have learned in the previous article that income from dividends is exempted u/s 10(34).
Income from dividends shall be chargeable to tax at the rate of 10% if the amount received exceeds ₹ 100000 (Ten Lakhs).
You can easily disclose the amount less than 10 Lakhs under exempt income.
Income from PF, ESI
Provident fund withdrawal is taxable under certain circumstances and exempt under certain circumstances.
Income from EPF must be punched into “Income from other sources” if its taxable.
In what circumstances EPF is taxable?
There is some important point we will always remember.
- If an employee received an amount < ₹ 5,00,000 (five Lakhs) before completion of 5 years of his employment – The taxpayer required to disclose the income from EPF – No tax is applicable.
- On the other hand, If an employee received an amount > ₹ 5,00,000 (five Lakhs) before completion of 5 years of his employment – the employee is liable for 10% of Tax.
- After completion of its employment continuous service for more than 5 years – such withdrawal is exempt from tax.
Income from winnings from lotteries, gambling, races or reality show.
Under section 194 B of the income tax act, any income earned by way of winning the lottery, gambling or any reality show is taxable @ 30%.
If the amount of price exceeds ₹ 10000, the TDS is deducted u/s 194B.
Deduction u/s 80C is also not allowed from the earning from lotteries, gambling, races or reality show.
Income from gift account – tax is mandatory
Being an individual or salaried, sometimes an amount in the form of GIFT is received.
Some part of the gift received is nontaxable,
Here are the examples:
- Any gift received from the relative or non-relative as marriage present even in the form of cash is non-taxable.
- The amount or gift received under the will of the relative is non-taxable.
- Gift received from any financial institution specified by the government is tax-free.
Instead of above some gifts are taxable:
- Hard cash received up to ₹ 50000 is nontaxable, but the cash exceeds ₹ 50000 turns the whole amount taxable.
- If you received an immovable property as the gift, the value of stamp duty up to ₹ 50000 is nontaxable, if the stamp duty exceeds ₹ 50000 (the different amount treated as taxable).
Interest income received from other investments
There is a lot of investment platform which provides interest income for the taxpayer, for instance, capital gains tax-saving bonds, corporate bonds, corporate fixed deposits, recurring deposit, etc.
In normal scenario (if you have not submitted Form H or Form G), to the bank, the bank deducts the TDS from your interest of FD or RD and you will trace the deduction from Form 26AS.
If TDS is not deducted by the bank, you responsible to pay the tax by yourself.
Important Note: After discloser of interest received from Saving account or recurring account into “Income from other sources”, you are also permitted to mention the same amount u/s 80TTA. Under this section interest income, up to ₹ 10000 is exempted.
This is some of the Income from other sources under the income tax act, the treatment of income for the individual required careful attention while filling ITR form.
How to file ITR for income from other sources
Filling Income from other sources along with salary income in ITR 1 is not a difficult task, here is the step by step guide to walk you through these difficulties.
- Step 1 – Select the ‘Computation and Income’ Tab in ITR Form, you will find B3 income from other sources section.
- There are four categories along with any other (which consists of several options, we have already discussed above).
- Select according to your facts and click Add button if you have more then multiple categories.
- Enter the amount
Income from other sources problems and solutions
Question:- Can commission income be shown under income from other sources?
Solution- Yes, In such case, if an individual is earning only from the commission or along with salary subject to total income up to Rs 50 Lakh you can opt ITR-1 to file the return. But, if his total income exceeds Rs.50 Lakhs then ITR-2 Form is required.
Question:- What would happen if we don’t declare income from other sources?
Solution – Any amount you have paid considered as Income in your account, if you don’t disclose your income, the department will grab you and you will get an Income tax notice.