Income from other sources
20 Oct 2022
Income from other sources:
The Income Tax Act has five heads of income:
Income from Salary,
Income from House property ,
Income from Business and profession,
Income from capital gain,
‘Income from Other Sources’ being one.
Income from other sources is the last head of income. Any income which is not included in other heads of income is by default covered under the head ‘’Income from other sources”.
Section 56(1) covers any income which does not fall under any head of Income is taxable under income from other sources. Section 56(2) covers ten incomes which are always covered under the head income from other sources.
Following are Incomes which are always covered under the head income from other sources :
1. All dividend Income: - According to Sec. 56(2)(1) of income tax act 1961 dividend income will always be taxed under the head income from other sources.
2. Income from winnings from lotteries, crossword puzzles, horse races, betting etc is always taxable at a rate of 30% under the head income from other sources.
3. Any sum received by the employer from his employee as contributions to any staff welfare scheme as specified in Sec. 56(2)(ic) of Income Tax Act are taxable under income from other sources if they are not taxed under the head Profit and gain of Business and profession.
4. Income from interest on securities, Bonds, and deposits, interest from saving banks is taxable under income from other sources. Interest from savings banks is exempt up to Rs. 10000 under sec. 80TTA for residential individual’s aged less than 60 years.
Ex :- If a Person name A age 55 Years received income from saving bank Interest Rs. 25000 then in the head of income from other sources it is taxable Rs. 25000 but under sec. 80 TTA Rs. 10000 will be exempt.
5. Income from hiring or letting out Pant & Machinery, Furniture: - As per sec. 56(2)(ii) income by way of hiring or letting out of plant and machinery are taxable under income from other sources if they are not taxed under the head Profit and gain of Business and profession.
6. Any sum received under a Key man insurance policy :- As per sec. 56(2)(iv) any sum received under keyman insurance policy including bonus are taxable under income from other sources if they are not taxed under the head Profit and gain of Business and profession.
7. If any sum received in cash or in kind of securities, immovable property, jewelry, as a gift exceeds Rs. 50000 the whole amount taxable under income from other sources. If the value of Rs. 50000 and less then there is no tax liability. If the gift amount is more than Rs. 50000 then the full amount is taxable. It is not taxable if a gift is received from close relatives.
8. Family pension received by family members of a deceased employee:- Income from Family pension scheme is also taxable under the head income from other sources. This income attracts a deduction of Rs. 15000 or 1/3 of the family pension amount whichever is lower.
9. Agriculture Income from a place outside India.
10. Income from undisclosed sources:
· Sec. 68 -Unexplained Cash credits.
· Sec. 69- Unexplained Investments.
· Sec. 69A- Unexplained money.
· Sec. 69C – Unexplained Expenditures.
11. Any Other income which is not covered by any other head of income is taxable under income from other sources.
Expenditure/ Deduction Allowed from income from other sources.
· Any commission and remuneration paid to any person for earning Interest or dividend income.
· Taxes, Insurance, Depreciation etc. on plant & Machinery , Furniture, Building rented for rental income.
· For family pension Rs. 15000 or 1/3 of pension whichever is lower.
· Saving Bank Interest upto Rs. 10000 U/s 80TTA.
· Expenditure in connection with winnings from lotteries, gambling etc.