INCOME FROM OTHER SOURCES
This is a residual head of income.
If an assessee has any income which is not exempt and which is not taxable under the first 4 heads of
income, it will be taxable under this head.
Some of the specific incomes which are taxable under this head are-
1. Interest on deposits
2. Interest on securities
3. Dividend income
4. Family pension
5. Director’s sitting fee
6. Income from letting out of any assets other than House Property. For example, land, composite
letting out (factory with plant and machinery).
7. Gifts received from certain persons.
(A) TAXABILITY OF DIVIDEND
Note: Earlier, a company used to pay DDT @15%. DDT stands withdrawn from 1 st April
2020. Now, Div Y is taxable in the hands of individuals @10%. TDS will be deducted if Div
Y > 5K
(if Div Y < 5K then deducted as per slab rates)
NOTE: Dividends received from a foreign company are fully taxable in the hands of the
recipient shareholder.
(B) TAXABILITY OF WINNINGS FROM LOTTERIES, ETC.
Any income that any assessee receives from winning lotteries, crossword puzzles, card
games, horse races, or any game of a similar nature shall be taxable at a flat rate of 30%.
No deduction whatsoever is permissible from such income. TDS @30% (if
Y>10,000)
Further, on such income, tax is deducted at source @30%, therefore if the net amount
of winning is given, we shall have to include the gross winnings which will be
computed as follows:
NET AMOUNT * 100 /70
If any winning is in kind, then the market value of the prize shall be included in the
income. (The person paying the prize will ensure that the winning person deposits
a tax of 30%, then only he receives the prize)
If the gross winnings are up to Rs.10,000, no tax is to be deducted.
Special Rate of Income Tax in case of winning from online games (Sec
115BBJ) W.E.F. AY 2024-25
Any income from winnings in online games (such as fantasy sports, poker, rummy, e-
sports, etc.) is taxable at a flat rate of 30% under Section 115BBJ (introduced via the
Finance Act 2023, applicable from FY 2023-24).
This income does not allow deductions (e.g., no deduction for expenses incurred, losses,
etc.)
(C) TAXABILITY OF INTEREST ON SECURITIES
Securities here refers to any amount of a secured debt.
Securities could be of 2 types-
(i) Govt. securities
(ii) Non govt. securities
1. In case of govt. securities, there is no TDS except on (8% saving bonds) issued by the govt.
(tax=10%)
2. In case of non govt. securities TDS is applicable @10%.
The person who is the owner of the securities on due dates, becomes eligible for the interests due on
that date and therefore, it will be treated as his income.
NOTE: There are certain securities that are called tax-free securities, if there are issued by the
government; interest on them shall be exempt.
if non-government bodies issue any tax-free bonds, then the tax on interest of such bonds is paid by
the non-government body the holder of the bond will receive interest that has to be grossed up.
Grossing-up formula:
Gross Interest=Net Interest×100/100−TDS
Note: Interest on savings account with the post office is exempt up to INR 3500 (Deduction
u/s 8TTA)
(D) TAXABILITY OF FAMILY PENSION
Family pension is the amount paid by an employer to the family of a deceased employee. It is not the
income of the deceased employee but is taxable in the hands of the recipient (family member).
A standard deduction is allowed at 1/3rd of the pension, subject to a maximum of ₹15,000
Note: The standard deduction is available regardless of whether the legal heir opts for the old
regime or the new tax regime.
Ex-gratia payments (such as lump-sum amounts given to the family) are not taxable.
(E) ANY SUM RECEIVED INCLUDING THE AMOUNT ALLOCATED BY WAY OF
BONUS, AT ANY TIME DURING A PREVIOUS YEAR, UNDER A LIFE
INSURANCE POLICY, WHICH IS NOT EXEMPT UNDER SECTION 10 (10D)
Any sum received (including bonuses) during a previous year under a life insurance policy is
generally exempt from tax under Section 10(10D), except in the following cases:
1. Unit Linked Insurance Policies (ULIPs): Sums received under ULIPs are not exempt.
2. Keyman Insurance Policies: Sums received under Keyman insurance policies are
taxable and excluded from Section 10(10D) exemptions.
3. High Premium Policies:
If the aggregate premium paid during any previous year on life insurance
policies (issued on or after 1st April 2023) exceeds ₹25,00,000, the sum
received will not be exempt under Section 10(10D).
The taxable portion of the sum received will be the amount exceeding the
aggregate of the premiums paid (during the term of the policy) that has not
been claimed as a deduction under any other provisions of the Income Tax
Act.
4. Exception:
The proceeds from life insurance policies will remain exempt under Section
10(10D) if the amount is received on the death of the insured person,
regardless of the premium amount.
In cases where the proceeds are not exempt, the income is taxable under the head "Income
from Other Sources".
(F) TAXABILITY OF INTEREST ON DEPOSITS
(G) AMOUNT RECEIVED ON FORFEITURE
If the transaction for the sale of a property is canceled and the advance is forfeited, it shall be deemed
to be the income of the person who shall forfeit the amount.
(H) TAXABILITY OF GIFTS Section 56(2)(x)
Where any person receives in any P.Y. any of the following, it shall be deemed to be an income of the
recipient-
(i) Any sum of money from any person/persons of an amount exceeding Rs. 50,000 in a
year, the entire amount shall be the taxable Y(income).
(ii) For a movable property-
Without consideration: If fair market value > 50,000, the full amount will be taxable
With consideration: (If FMV exceeds consideration by Rs.50000, the entire excess
amount shall be taxable (FMV-consideration).
(iii) Any immovable property-
Without consideration (If SDV > 50,000): SDV taxable.
With consideration: If the stamp duty value exceeds by Rs. 50000 or 10% of
consideration, the taxable amount shall be SDV- consideration
Movable property shall include the following:
1) Shares and securities
2) Jewellery, bullion
3) Painting, sculptures, work of any art etc.
# Transactions not covered under S.56(2)(x)
(i) Gifts received from relatives
(ii) Gifts received through a will or succession
(iii) Gifts received in contemplation of death.
(iv) Gifts from government authorities and local bodies.
(v) Gifts from educational institutions, universities, etc.
(vi) Gifts from a registered charitable trust.
(vii) Gifts received by a trust which has been created solely for the benefit of the relatives of
the settler.
(viii) Received on the occasion of an individual's marriage.
# Meaning of Relative-
Relative means:
(i) Spouse
(ii) Brothers and sisters
(iii) Brothers and sisters of the parents
(iv) Brothers and sisters of the spouse.
(v) Any person lineally ascendant or descendant.
(vi) Lineal ascendant or descendant of the spouse.
(vii) Spouse of any of the above persons.
Amount not deductible under Income from Other Sources
1. Personal Expense
2. Income tax paid
3. Interest paid outside India
4. Salaries paid outside India
5. Expenditure in connection with winning of lottery
6. Excessive payment to relatives
QUESTIONS
Question 1
Following are the income/receipts of Mrs. A for the previous year.
(i) Rent received for a house property
4,00,000
(ii) Rent received from letting out a factory building along with P&M
6,00,000
(iii) Dividends received from an Indian co.
1,00,000
(iv) Dividend from a foreign Co.
60,000
(v) Interest received on deb. Of a Co.
70,000
She has 8% saving bond of RS 10,00,000 on which she received interest of Rs. 72,000.
(vi) Gift received from her father’s friend
3,00,000
(vii) Gift received from her friends on her birthday
60,000
(viii) Gift received from her brother
2,40,000
She has purchased a property from X for RS 40,00,000, the stamp duty value of which is Rs.
48,00,000.
Compute her total Y for A.Y 2024-25.
Question 2
X furnishes the following info for P.Y. 2023-24
1. Amount received on winning of a lottery 3,50,000
2. Dividend received from an Indian co. 20,00,000
3. Long-term cap gain on sale of land 5,00,000
4. STCG on shares (STD paid) 2,00,000
5. Gifts received on his marriage anniversary 4,00,000
He is eligible for deduction of Rs. 1,00,000 u/s 80C and Rs. 50,000 u/s 80G
Compute the tax payable for A.Y. 2024-25.