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Income Tax Department bifurcates income into 5 parts:-
Income from Other Sources refers to any income that is not derived from employment, business, or profession. It is a residual category of income that includes various types of income, such as interest on savings accounts, fixed deposits, dividends from investments, rental income, and gifts received etc. This income does not count under any of the other heads of income.
While filing income tax returns via ITR 1 taxpayers usually need clarification about what comes under income from other sources & this confusion leads to trouble. Trouble comes in the form of penalty & interest
Therefore, here we will Discuss about other sources income
Under the Income Tax Act, a taxpayer's earnings or income are categorized into five heads, and it is essential to correctly classify the income under these heads for accurate tax calculation. The five heads of income are as follows:
According to section 56(1), of the Income Tax (IT) Act, 1961, Income from other sources includes all income you earn from other sources. In simple words, if any income can not be declared under any other income heads. it will come under this head. Income from Other Sources is a category of income that includes all types of income that cannot be classified under any other head of income such as salary,house property, business or profession,and capital gain.
Some common examples of income from other sources are:
Interest earned on a savings account is a common type of income under the head 'Income from Other Sources'. This income is taxable as per the income tax slab rates applicable to the individual. It is important to note that the bank or financial institution where the savings account is held deduct tax at source (TDS) on the interest earned on savings account, if the interest earned exceeds Rs. 40,000 per year.
Individuals are required to report the interest earned on their savings account while filing their income tax returns. The interest earned on a savings account can be easily calculated by referring to the bank statement or by checking the passbook entries.
individuals can claim a deduction on the interest income earned from savings accounts under section 80TTA of the Income Tax Act.
The deduction under section 80TTA is available for interest earned on savings accounts held with a bank, co-operative society or a post office. The maximum deduction that can be claimed under this section is Rs. 10,000 in a financial year.
If the interest earned on the savings account exceeds Rs. 10,000 in a financial year, then the excess amount will be considered as taxable income under the head 'Income from Other Sources'. It is important to note that the deduction under section 80TTA is not available on interest earned on fixed deposits, recurring deposits or any other type of deposits.
Interest earned on fixed deposits is considered as income under the head 'Income from Other Sources' and is taxable as per the individual's income tax slab rate. The bank or financial institution where the fixed deposit is held deducts tax at source (TDS) on the interest earned on fixed deposits, if the interest earned exceeds Rs. 40,000 per year. Senior citizens,can enjoy an income tax exemption upto Rs 50,000 on the interest income they receive from fixed deposits with banks, post offices etc., under Section 80TTB.
It is important to note that TDS is deducted on the total interest earned on fixed deposits, if the amount of interest earned exceeding Rs.40000 or Rs.50000 as the case may be.. Therefore, even if the interest earned on a fixed deposit is less than Rs. 40,000 per year, individuals are required to report the interest earned while filing their income tax returns.
Avoiding TDS (Tax Deducted at Source) on fixed deposits can be challenging, as banks are required to deduct TDS on interest income if it exceeds a certain threshold. However, there are a few strategies you can consider to minimize the impact of TDS on your fixed deposits:
While filing ITR 1 online, you’ll have to disclose all the income from other sources as a total amount. As shown in the screenshot below, this disclosure has to be made under tab “Computation of Income & Tax” in the field “B3: Income from Other Sources (Ensure to Fill Sch TDS2)”.
The net earnings under the head 'Income from Other Sources' in income tax are calculated as follows:
Gross Income from Other Sources-Deductions allowed under Section 57= Net Income from Other Sources.
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Interest earned on fixed deposits and recurring deposits is considered as income under the head 'Income from Other Sources' and is taxable as per the individual's income tax slab rate. Therefore, individuals are required to report the interest income earned from fixed deposits and recurring deposits while filing their income tax returns.
In order to report the interest earned on fixed deposits and recurring deposits in the income tax return, individuals need to calculate the total interest earned from these deposits during the financial year. This can be done by referring to the interest certificate provided by the bank or financial institution where the deposit is held.
Once the total interest earned is calculated, individuals can report it in the income tax return under the head 'Income from Other Sources'. It is important to note that the total interest earned on fixed deposits and recurring deposits is added to the individual's total income and taxed as per the applicable income tax slab rate.
Income from Other Sources includes various types of earnings that do not fall under the other four heads of income (i.e., Salary, House Property, Business or Profession, and Capital Gains). Here are some examples of income that are categorized under "Income from Other Sources":
Pension income is taxable under “Income from Salary,” while family pension income is taxable under “Income from other Sources”.
To save tax, make a fixed deposit with a lock-in period of 5 years. Now, claim the amount of investment as a deduction u/s 80C up to Rs.1,50,000. But note that interest from such FD is taxable as income from other sources. A person can file forms 15G and 15H also when their total income is less than the basic exemption limit. By filing it TDS will not be deducted.
Yes, you should disclose interest income under the head Income from Other Sources in ITR 1 irrespective of tax deduction and later claim the tax credit using Form 16A.
Yes, you can claim a deduction of such expenses provided they directly relate to such income.
The asset includes “painting” as per Income Tax Act and If the value of such gift exceeds Rs.50,000, it will be taxable under the head Income from Other Sources.
No, gifts received (whether in cash or kind) on the occasion of marriage are totally exempt from income tax.
If you have received this gift on any occasion (other than marriage) & its value exceeds Rs.50,000. Then the whole amount will become taxable under the head Income from Other Sources.
Winnings will be taxable under the Head of “Income From Other Sources” and will be liable to tax @30%.
Casual income means income that is not earned in a regular manner, such as lottery income, horse races, etc., and they are charged @30%
It would not be appropriate to leave it blank. It is always recommended to show income in ITR whether TDS has been deducted or not.
It is incorporated in that person’s return whose PAN is registered with the bank.
If tuition income is part-time, it can be shown under Income from other sources, but if the main source of income is Tuition fee, then it will be considered as business income, and GST will be applicable whenever gross receipts cross the threshold limit.
The Income Tax department could issue notice to the taxpayers who fail to include the income from other sources.
Yes, it is liable to include income from other sources.
Income from dividends, one-time income, Interest from deposits, Income from machinery, plant or furniture, and many more which are not taxed under any other head of income.
Yes, if there is any expense incurred for earning income, it can always be deducted except income from lottery, betting and gambling.
