Income from Other Sources: Inclusions and Tax Implications
“Income from Other Sources” is any income which is not taxable under any other “Heads of Income”. Any income which does not specifically come under Income from Salary, Income Business or Profession, Income from House Property or Income from Capital Gain, will be taxed under “Income from Other Sources.
Following Incomes are taxed under “Income from Other Sources”:
Dividends received from non Indian entities is chargeable to Tax. Dividend received from Domestic company is exempt from tax if it chargeable to dividend distribution tax (DDT) U/S 115-O. But as per the Finance Act,2016, Dividend in excess of Rs 10,00,000 received by any individual/HUF/Firm is chargeable to tax.
Winnings from Lotteries, Crossword Puzzles, Races, Gambling, Betting or any sort of gaming activities is taxed under this head.
Income from Interest received on the compensation or enhanced compensation is taxable under the head “Income from Other Sources”. Such income is deemed to be income of the year in which it is received, with a deduction of 50% is allowed on such income.
Gifts received by an individual or HUF (if taxable) is also taxed under this head provided the amount received exceeds Rs 50,000/- in the previous year.However, Gifts received from immediate relative or inheritance or any Academic Institution is exempted U/S 10 (23C). Gifts received on account of marriage is also exempt from tax.
Immovable property received without consideration and stamp duty value exceeds Rs 50,000/-, stamp duty value of the property is chargeable to tax. If property is received for consideration but value is less than stamp duty value exceeding Rs 50,000/-, the difference is chargeable to tax. (For moveable property/securities of closely held company determining factor is “Fair Market Value instead of Stamp Value”)
Income from Sub letting.
Income in form of interest from Bank Deposits. (Savings account interest upto Rs 10,000/- is exempt, Rs 50,000/- in case of Senior Citizen)
Following Incomes are also Chargeable to tax if not, taxed under “Income from Business or Profession”:
1.) Contribution to the fund for the welfare of the employees received by an employer.
2.) Income by way on interest on Securities.
3.) Income from letting out or hiring of plant, machinery, furniture or building with furniture (if both are inseparable)
4.) Any sum received from Keyman Insurance Policy including Bonus.
Deductions available in terms of Taxable Amount:
Amount received from Life Insurance Policy. Provided premium paid is 10% of the sum assured for the policies taken after April 1st, 2012.
Repairs and Depreciation expenses in case of Plant, Machinery and Furniture let out.
Any remuneration or commission paid towards realization of dividend income or interest on borrowed capital used to invest in securities.
Family pension received by legal heirs of deceased employee from the employer is available for deduction upto Rs 15,000/- or 1/3 of the pension amount (whichever is lower).
Expenses Not Allowed as Deductions while computing Income chargeable to tax under the head “Income from other Sources”:
Personal Expenses of the Assessee.
Any interest chargeable under the Act which is payable outside India on which tax has not been paid or deducted at source.
Any expenditure incurred in respect to income earned through winning from Lotteries, Gambling, Betting, Races or any such kind of activity.