Income from other sources under income tax act is the head of the income which is unidentified.
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.
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 the income tax act.
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 IT Dept.
- Examiner-ship fees received by a teacher (not from 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 items classified as income from other sources:
Income from Dividend
We have learned in the previous article that income from dividend is exempted u/s 10(34).
Income from dividend shall be chargeable to tax at the rate of 10% if the amount received exceeds ₹ 100000 (ten Lakhs).
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.
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 income tax act, the treatment of income for the individual required careful attention while filling ITR form.