Income from other sources - rates, exemption, calculation

Hello. In this post, we will take a look at income from other sources under Income Tax. We will cover different topics such as:

  1. What is income from other sources?
  2. List of items under Income From Other Sources
  3. Exemptions applicable for different sources of income
  4. How to calculate tax on income from other sources

What is Income from other sources?

Income from other sources is a category under the Income Tax in which we can consider all the different sources of income which doesn’t fall under other heads such as income from salary, or house property or capital gains.

This type of income falls under two categories: recurring and non-recurring.

Recurring income: Any income received at regularly at equal intervals. This generally includes interest income from savings bank, post office savings, fixed deposits, recurring deposits etc.

Non-recurring income: Any income received only once. This generally includes Income from lottery,  gambling, horse racing etc.

Next, let us see the items which comes under this type of income.

List of items under Income From Other Sources

  1. Dividend: Dividend is chargeable at a rate of 10% if the aggregate amount of dividend during that year exceeds Rs. 10,00,000. This is applicable for individuals/HUFs. If the dividend is received from a domestic company and it is chargeable under dividend distribution tax, then it will be exempted.
  2. One-time income: Income from lotteries, crossword puzzles, horse races, games, gambling or betting.
  3. Interest on securities if it is not taxable under “Profits and Gains of Business or Profession”.
  4. Income from machinery, plant or furniture belonging to taxpayer and let on hire. This is applicable if income is not chargeable to tax under the head ‘Profits and Gains of Business or Profession’.
  5. Composite rental income from letting of plant, machinery or furniture with buildings, where such letting is inseparable. Again, this is applicable if this income is not taxable under the head ‘Profits and Gains of Business or Profession’.
  6. Any sum of money or property received by an individual or HUF from any person will be taxable under income from other sources. The exception for this is if the amount or property is received from relatives*. (Take a look at the list of relatives as defined by ITD – Relative list)
    • If any amount that is received without consideration and is more than Rs. 50,000 during the previous year, then the whole amount will be taxable.
    • If an immovable property is received without consideration and the stamp duty value exceeds Rs. 50,000, the stamp duty value of such property will be taxable.
    • If immovable property is received for consideration which is less than the stamp duty value of property by higher of following amount the difference is taxable:
      • the amount of Rs. 50,000
      • the amount equal to 5% of consideration
    • If movable properties** is received without consideration and the aggregate fair market value of such properties exceeds Rs. 50,000, then the whole of aggregate fair market value of such properties will be taxable.
    • If movable properties are received for consideration which is less than the aggregate fair market value of properties by an amount exceeding Rs. 50,000, the difference between the aggregate fair market value and the consideration is taxable.
  7. If an employee receives any compensation due to the termination of his employment or modification of terms and conditions relating to the job, then that amount will be taxable.
  8. Any sum of money received as an advance or otherwise in the course of negotiations for the transfer of a capital asset shall be charged to tax under this head, if:
    • a) Such sum is forfeited; and
    • b) The negotiations do not result in the transfer of such capital asset.

Exemptions applicable for different sources of income

Nature of Income Deductions allowed
Dividend or Interest on securities Any reasonable amount paid as commission or remuneration to banker or any other person for purpose of realizing dividend or interest on securities
Employee’s contribution towards EPF, Superannuation Fund, ESI Fund or any other fund setup for the welfare of such employees If employees’ contribution is credited to their account in the relevant fund on or before the due date, then the complete amount is exempted
Rental income letting of plant, machinery, furniture or building Rent, rates, taxes, repairs, insurance and depreciation etc.
Family Pension 33.33% of family pension subject to a maximum of Rs. 15,000.
Any other income Any other expenditure (not being capital expenditure) expended wholly and exclusively for earning such income.

Income from other sources

How to calculate tax on income from other sources?

Tax on income from other sources is calculated in 2 ways.

If the income is from a non-recurring source (or causal income) such as income from lottery, horse race etc, then a tax of 30% is directly applicable on the total income amount.

Ex.: If your casual income is Rs.1 lakh, then tax of Rs. 30,000 is applicable on the amount.

For any other type of income from other source, the total taxable amount will be added to other taxable income/s and tax will be calculated according to income tax slab.

Ex.: If you are getting any family pension of Rs. 50,000, then you will get an exemption of 33.33% or 15000, whichever is the least.

33.33% of 50000 =  16665 or 15000. Since 15,000 is the lesser amount, that will be the exemption amount.

So taxable income will be 50000 – 15000 = 35,000.

35,000 will be added to other income and income tax slab will be applied on total taxable income.

This completes our blog on income from other sources. We hope you found this helpful. If you have any questions, drop them in the comment section below.