TAXATION OF
INCOME FROM
OTHER SOURCES
Group 2
Daryl D’souza - 13 , Kaif Shah - 24, Praniksha Karapurkar - 25,
Khushal Vagurdekar - 27, Mihir Sardessai - 30, Rajlaxmi Relekar -
38
Income from other sources
Income from other sources is the income that doesn’t fall under the
category of other 4 heads i;e Income from capital gains , income
from business and profession , income from salary and income from
house property.
As per section 56 of the Income tax act , the following three
conditions should be met in order for an Income to classify as
Income from other sources.
Income is produced by chance
These earnings are not excluded under any other provisions of the
Income tax act.
Income from these sources cannot be claimed as wages, rental
Income, company or professional profits , or capital gains.
Examples of Income from Other
sources
Dividend
One-time income – lotteries, horse races, gambling, etc
Gifts
Any sum of money or value of property received in following
situation would be tax free :-
From a relative
On the occasion of persons marriage
From a local authority
From a fund or foundation ,University, hospital , or other
educational institution , or from any other trust or institution.
Expenses not allowed as a deduction
under “Income from other sources”
Personal expenses - Any personal expenses of the assessee is not deductible.
Interest - Any interest which is payable outside India on which tax has not been paid.
Salary - Any payment (which is chargeable under the head “Salaries” in the hands of
recipient and payable outside India), is not deductible if tax has not been paid or
deducted therefrom .
Wealth tax - Any sum paid on account of wealth-tax is not deductible.
TDS Default - Disallowance provisions pertaining to TDS defaults covered by section
40(a)(ia) are applicable .
Amount specified by - Any expenditure referred to in section 40A like excessive or
unreasonable payments to certain specified persons [Section 40A(2)] and
payments exceeding Rs. 20,000 otherwise than by way of account payee cheque.
Expenditure in respect of royalty and technical fees received by a foreign
company- In the case of foreign companies, expenditure in respect of royalties
and technical service fees as specified by section 44D is not deductible.
Expenditure in respect of winnings from lottery - No deduction shall be allowed
under any provision of the Act in computing the income by way of any winnings
from lotteries, crossword puzzles, races.
Expenses allowed as a deduction under
“Income from other sources”
In the case of dividend income, any reasonable sum paid in
compensation or commission for the purpose of realising dividends or
interest.
In the case of family pension income
Any other expenditure incurred solely for the purpose of earning such
income.
In the case of compensation interest or enhanced compensation.
Procedure to fill “Income from other
sources” in ITR (Income Tax Return)
While filing ITR 1, you'll have to disclose all the income from other sources as a total
amount.
This disclosure has to be made under tab “Computation of Income & Tax” in the field
“B3 as shown in the screenshot on the next slide.
Examples of Income From Other Sources
Dividend Income
Interest Income
Family Pension Income
Gifts Received
Royalty Income
Tax rates and rules for “Income from
other sources”
Depending on the type of income, the tax treatment of income from other sources can
vary.
For instance, income received from lottery winnings, horse races and other types of
betting are taxed at a flat rate of 30% plus applicable cess.
The income tax slab of the tax payer has no impact in this case.
On the other hand, dividend income from shares and/or mutual funds are taxable as
per the income tax slab rate of the individual for the applicable financial year.
Similarly, there are different rules for taxation of other types of income from other
sources received by an individual.
Tax on the interest Income from savings
bank account
Interest from savings bank account is taxable.
There is no Tax Deducted at source.
Deduction upto Rs.10000/- can be available under section 80TTA if
the interest earned from all savings account of an individual is
10000 or above.
If total income from interest is less then 10000 then you don't have
to pay tax.
Tax on the interest income from fixed
deposits
As per ITA 1961, interest income on FD is considered as Income from other
sources and hence it is fully taxable.
From April 2019, if interest on FD is more than 40000 then PAN users have
to pay 10% tax and Non PAN users have to pay 20% tax.
TDS on FD is deducted when the interest is earned and not when interest is
received.
In case total income in a financial year is not more than 250000, then the
taxpayer is exempted from tax implications.
Tax on dividend income
Tax liability of Dividends before 1 April 2020
Dividends were tax free for shareholders upto Rs.10lakhs.
Instead the companies had to pay Dividend Distribution Tax (DDT)
of 15% on the gross dividend declared.
Tax liability on dividend after Finance Act 2020
Burden of tax was shifted from companies to shareholders.
Companies no longer need to pay DDT
If dividend received is more than 5000, TDS at the rate of 10% is
deducted.
Shareholders will have to pay tax on dividend income at the
income tax slab rates applicable to them.
Thank you !
