Income from Other Sources - Deductions & Exemptions

Income from Other Sources is one of the five main heads of income under the Indian Income Tax Act. It includes any money you earn that doesn't belong to the main categories, such as salary, house property, business, or capital gains.

Why is it called "Other Sources"?

Imagine your income split into categories, but there are certain income types, such as interest from savings accounts, winnings from lotteries, dividends from shares, gifts (above ₹50,000), etc. These types of income are all grouped together under “Income from Other Sources”. 

Contents

• 5 Heads of Income
• What is Income From Other Sources?
• Interest Income - Savings Bank Account
• Deduction on Interest Income Under Section 80TTA
• Tax on Fixed Deposits
  • Avoiding TDS On Fixed Deposits
• How to Compute Net Earnings Under Income from Other Sources
• How to Report Interest from Fixed Deposits and Recurring Deposits on Your Tax Return
• Taxation Of Winnings From Lottery, Game Shows, and Puzzles
• What is the Taxable Income in India?
• Conclusion
• Frequently Asked Questions (FAQs)

5 Heads of Income

As mentioned above, according to the Indian Income Tax Act, your entire income is classified into five major heads of income. The 5 Heads of Income are:

1. Income from Salary: This category includes income from your job or employment, such as basic salary, allowances, bonuses, pensions, etc.

2. Income from House Property:  Covers income from renting out residential or commercial property. Keep in mind that only rental income is taken into consideration here, not the sale of property.

3. Profits and Gains from Business or Profession: This includes income from running a business, freelancing, or a profession (like doctors, lawyers).

4. Capital Gains: This category includes income from selling a capital asset like property, shares, mutual funds, gold, etc.

5. Income from Other Sources: Any income that doesn’t fall under the above four heads. Governed by Section 56 of the Income Tax Act. 

What is Income From Other Sources?

According to section 56 of the Income Tax Act of India, if any income doesn't fall under salary, house property, business/profession, or capital gains, it will be taxed under this head. Whether you're asked to give 15 examples of income from other sources or just a few, the following income from other sources list will come in handy.

Interest Income (from savings accounts, FDs, RDs, etc.)

Interest income is a common income component from other sources. It includes interest earned on savings accounts, fixed deposits, recurring deposits, and other financial instruments. The interest income is added to the taxpayer's total income and taxed at the applicable slab rates.

Dividends and Mutual Funds

Income earned from dividends and Mutual Funds is considered under this head. While dividends from domestic companies are tax-free, those from foreign companies are taxable. Capital gains from mutual funds are also accounted for under this category.

Family Pension

Pension received by family members after the taxpayer's demise is taxable under Income from Other Sources. The taxable amount is determined based on the pension rules and the individual's relationship with the deceased.  For additional financial security, consider exploring Term Insurance, which can provide a lump-sum benefit to your family in case of unforeseen events.

Lottery and Gambling Winnings

Any winnings from lotteries, card games, betting, or gambling are subject to taxation under this head. The tax rate is typically higher for such earnings, and the payer often deducts TDS (Tax Deducted at Source).

Gifts and Cash Prizes (beyond the exemption limit)

Gifts and cash prizes exceeding a specified limit are treated as taxable income under Income from Other Sources. However, certain gifts from relatives and on specific occasions may be exempted.

Income from Royalties

Authors, artists, and creators who receive royalties for their intellectual property fall under this category. Royalties are taxed at different rates based on the nature of the work and the agreement.

Commission Income

Income earned through commissions and brokerage is classified under this head. Whether it's a commission from stockbroking, real estate, or any other service, it is taxable.

Annuity Payments (from insurers or institutions)

Annuity payments received from insurance companies or other financial institutions are taxable under Income from Other Sources.

Income from Subletting

If you earn income by subletting a property you've rented, it is taxable under this head. The sublet income needs to be added to your total income for taxation.

Interest on Income Tax Refunds

Interest received on Income Tax refunds falls under Income from Other Sources. It is essential to report this income while filing tax returns.

Prizes and Awards

Prizes and awards received in cash or kind, such as competitions or ceremonies, are taxable under this head.

Income from Savings Bonds

Interest from government savings bonds and similar instruments is taxed as part of Income from Other Sources.

Income from Foreign Assets

Income from overseas assets, including foreign bank accounts, investments, or properties, must be reported under this category and taxed accordingly.

Income from Lease (of machinery, land, etc.)

Lease income, such as leasing machinery, equipment, or land, is classified under this head for taxation.

Interest on Loans (given to others)

Interest received on loans given to individuals or businesses is included in this category for taxation purposes.

Interest Income - Savings Bank Account

Interest from savings accounts is a common form of income. Such interest is classified under the head ‘Income from Other Sources’. It is taxed according to your applicable income tax slab rates, meaning your tax rate depends on your total annual income. Unlike fixed deposits, it’s important to note that banks do not deduct Tax Deducted at Source (TDS) on interest earned from savings accounts. 

Remember that TDS and income tax are different; TDS is a mechanism for collecting tax in advance, whereas your final tax liability depends on your total income and slab.

Review your bank passbook or account statements to check how much interest you’ve earned from your savings account in a financial year. These will show you how much interest your savings account has earned during the financial year. 

Note: It is also essential to report this interest income from savings accounts when you file your income tax return. 

Deduction on Interest Income Under Section 80TTA

If you're an individual (age of 60 years or less) or HUF, you can take a deduction of up to ₹10,000 annually on interest from all savings accounts (not fixed deposits or RDs).

Keep in mind that Senior citizens (60 years and above) are not eligible for benefits under section 80TTA; Section 80TTB is exclusive to senior citizens. Thus, for elderly people, Section 80TTB provides a larger deduction of a maximum of ₹50,000. 

Tax on Fixed Deposits

Interest earned on Fixed Deposits (FDs) is fully taxable under the head Income from Other Sources. It is taxed according to your applicable income tax slab rate. The standard TDS rate is 10% if your Permanent Account Number (PAN) is provided. Without PAN, the rate increases to 20%.

Avoiding TDS On Fixed Deposits

If your total income is below the taxable limit:

• Submit Form 15G (for individuals below 60) or 

• Form 15H (for senior citizens) to your bank to avoid TDS.

How to Compute Net Earnings Under Income from Other Sources

To calculate your net income under this category, use this simple formula:

1. Add all incomes that fall under this head (interest, gifts, lottery, etc.)

2. Deduct any allowable expenses (e.g., you can subtract certain expenses related to earning this income).

3. Subtract applicable exemptions (e.g., Section 80TTA for savings)

4. Include the net figure in your total income and apply slab rates. 

Example:

Let’s say you have the following income and expenses:

• Interest on savings accounts: ₹5,000

• Dividend income: ₹2,000

• Rental income: ₹8,000

• Commission paid for managing investments: ₹1,000

Here’s the Step-by-Step to help you understand better:

• Gross Income: ₹5,000 (interest) + ₹2,000 (dividends) + ₹8,000 (rental) = ₹15,000

• Expenses: ₹1,000 (commission)

• Net Income: ₹15,000 - ₹1,000 = ₹14,000

• Section 80TTA Exemption: ₹10,000 (deductible from interest)

• Final Net Income: ₹14,000 - ₹10,000 = ₹4,000

Now, include this ₹4,000 in your total income and apply the tax slab to it.

How to Report Interest from Fixed Deposits and Recurring Deposits on Your Tax Return

Interest earned from Fixed Deposits (FDs) and Recurring Deposits (RDs) is taxable under this head. Here's how to report it in your Income Tax Return (ITR):

1. Calculate Total Interest Earned
Add up all the interest you earned from your fixed deposits (FDs) and recurring deposits (RDs) during the financial year.

2. Include in Your Tax Return
Enter the total interest amount under the ‘Income from Other Sources’ section while filing your Income Tax Return (ITR).

3. Pay Tax as Per Slab

Interest earned will be added to your total income and taxed as per your regular income tax slab.

Example:

• FD interest: ₹30,000

• RD interest: ₹10,000

• Total interest: ₹40,000

1. Report ₹40,000 under “Income from Other Sources”

2. Add to total income

3. Pay tax based on your slab (If you're a senior citizen, you may claim up to ₹50,000 under Section 80TTB). 

Taxation Of Winnings From Lottery, Game Shows, and Puzzles

Money earned from lotteries, game shows, puzzles, quiz competitions, and similar sources is known as casual income. Here's how it is taxed:

1. Flat 30% Tax Rate (plus surcharge and cess, if applicable).

2. No Deductions Allowed

3. TDS (Tax Deducted at Source): If the prize money exceeds ₹10,000, the organiser will deduct TDS at 30% (plus 4% cess, making it 31.2%) before giving you the winnings.

4. Reporting in ITR: Declare the full amount (before TDS) under ‘Income from Other Sources’ in your Income Tax Return.

What is the Taxable Income in India?

The taxable Income India from various sources is divided into slabs based on the income range. As per the FY 2024-25, the updated Income Tax rates for Indian citizens are as follows: 

According to the new tax regime:

According to the old tax regime:

Conclusion

Understanding Income from Other Sources in Income Tax is crucial for every taxpayer. This head of income covers various sources of income not classified under salary, house property, etc. Staying informed on the “Income from Other Sources” tax rate and the Income from Other Sources format is critical for accurate filing. Given the types of income tax, understanding these income tax heads ensures compliance with and accurate reporting of taxable income in India.

Frequently Asked Questions (FAQs)

Here are some common questions about Income from other sources with respect to taxation in India.

1. What is the Income from Other Sources meaning in income tax?

It refers to any income that doesn't fall under the main categories, like salary, house property, or business income. 

2. How do you explain income from other sources in income tax?

Income from Other Sources in Income Tax refers to earnings that don't fit under the main Income Tax heads, such as interest, rental income, dividends, gifts, lottery winnings, and others listed in the Income Tax Act.

3. How to calculate income from other sources?

To calculate income from other sources, add all earnings like interest, rent, dividends, and prizes. Subtract any related expenses, and apply the applicable tax rate to the remaining amount.

4. Is agricultural income taxable under Income from Other Sources?

Agricultural income is usually exempt from tax. However, if total agricultural income exceeds a certain threshold, it may be combined with Taxable Income in India and taxed under the Income from Other Sources rules.

5. How are gifts and cash prizes taxed under Income from Other Sources?

Gifts and cash prizes exceeding a specified limit are taxable under Income from Other Sources in Income Tax. However, sure gifts from relatives or on special occasions may be exempt as outlined in the Income from Other Sources notes.

6. Are scholarships and fellowships taxable?

Scholarships and fellowships are not taxable under the Income Tax Act as long as they are received for educational purposes. 

7. What do you mean by Income Tax for Indian citizens?

Income Tax for citizens in India is a tax on the annual income earned by the citizens or businesses of India in a financial year.

8. Is Commission Income taxable under this head?

Yes, commission and brokerage income are included in Income from Other Sources and are taxed under this Income Tax Head, as detailed in types of income under Income Tax Heads.

9. What is the tax rate for lottery and gambling winnings?

Lottery and gambling winnings are subject to higher Income from Other Sources tax rates than regular income sources, with TDS often deducted by the payer, as noted in the Income from Other Sources list.

10. What is the total number of Heads of Income under Income Tax?

According to the Income Tax Act of India, the total number of Heads under Income Tax is five, dividing the income sources into different categories.

11. What is the difference between head of income and source of income?

The "head of income" is the category under which your income is taxed, like salary or business income. The "source of income" is where the income comes from, such as your job or renting property. 

12. Is dividend received from mutual funds taxable?

Yes, the dividend you receive from mutual funds is taxable in India. This means that the income you earn from dividends will be added to your total income and taxed according to the income tax slab rates that apply to you.

13. Is income from animal husbandry tax-free?

No, income from animal husbandry is not tax-free. It is taxable because it is not considered agricultural income, which has special tax exemptions. 

14. What are casual incomes? 

Casual incomes are one-time or irregular earnings that don't come from regular sources, such as winning a lottery or a prize. 

15. What are the 10 examples of income from other sources?

Here are 10 examples of income from other sources include interest on savings accounts, Interest on fixed deposits, Dividends from shares or mutual funds, Rent from letting out property, Gifts or prizes (like lottery winnings), Income from casual sales of assets, Royalty income, Income from a family pension, Income from a trust, and Income from non-agricultural land. 

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.

Recent

Articles

How to Change Address in Passport – Step by Step Process

TeamAcko May 5, 2025

Height and Weight Chart for Indian Baby Boy

Roocha Kanade May 2, 2025

Height and Weight Chart for Indian Baby Girl

Roocha Kanade Apr 29, 2025

Rajiv Gandhi International Airport (HYD) - Hyderabad

TeamAcko Mar 14, 2025

Diu Airport (DIU)

TeamAcko Mar 5, 2025

All Articles

Topics

Parenting

Baby Development

Parenting

Baby Development

All Topics

Want to post any comments?