Guide on Other Income from IT perspective

Guide on Other Income from the perspective of Income Tax covering income by way of winnings from lotteries, crossword puzzles, races including horse races, card games, gambling or betting of any form. Income chargeable to tax under the head 'Income from Other Sources' in the perspective of Income Tax Act is covered in detail.

This document covers

What is Other Income?
What would be considered as Other Income?
Special Circumstances
Other Circumstances
Deductions not allowed for Income from Other Sources

1. What is Other Income?

Other income is a taxable income which does not fall under the category of Salary, House Property, Capital Gains, Business / Profession.

Learn more on @ Income under Income Tax Act — Explained

2. What would be considered as Other Income?

Dividend

Dividend income received from Domestic companies or Foreign companies is taxable under the head “Income from Other Sources”.
Rate of Tax : Dividend is taxable @ slab rates of individual
TDS : Payer will deduct TDS @ 10% if the dividend income exceeds Rs 5,000 per year
Deductions : Interest expenditure to earn such income is allowed as deduction. Maximum deduction allowed is 20% of dividend income

Casual Income

Income by way of winnings from lotteries, crossword puzzles, races including horse races, card games, gambling or betting of any form is taxable under the head “Income from Other Sources”.
Rate of Tax : Casual Income is taxable @ 30%.
TDS : Payer will deduct 30% TDS of the income paid exceeds Rs 10,000 per year
Deductions : No expenditure or allowance or deductions u/s chp VIA or adjustment of unexhausted basic exemption limit is allowed

Interest received on Compensation / Enhanced Compensation

Interest received on Compensation or Enhanced compensation is taxable under the head “Income from Other Sources” in the year of receipt.
Rate of Tax : Interest received on compensation or enhanced compensation is taxable @ slab rates of individuals
TDS : TDS is required to be deducted @ 10% if the compensation paid is more than Rs 2,50,000 per year
Deductions : 50% of interest received can be claimed as deduction u/s 56

Gifts : Any sum of money or value of property received without consideration or inadequate consideration is taxable in the hands of recipient under the head of “Income from other sources”

Kindly refer more Tax on Gifts in Exemption and Rules and Gift tax calculator

Compensation or any other payment received in connection with termination of employment

If compensation or any other payment received by any person in connection with termination of employment from any person except employer is chargeable under the head “Income from other sources” at Slab rates
If compensation or any other payment received by any person in connection with termination of employment from the employer is taxable under the head “Salaries”

Advance forfeited due to failure of negotiations for transfer of a capital asset

Advance received and forfeited after 01/04/2014 : It is taxable under the head “Income from Other sources” in the year of forfeiture of advance@ slab rates
Advance received and forfeited before 01/04/2014 : Advance forfeited to be deducted from cost of acquisition for computing capital gains the year of actual transfer of asset.

Family Pension

Family pension means a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his death. It will be taxable under “Income from other sources”
Rate of Tax : Family pension is taxable @ slab rates
Deductions : A deduction of Rs 15000 or 1/3 rd of family pension will be allowed as deduction

NOTE 1 : In addition to Old Tax Regime, Family Pension deduction is now available in New Tax Regime also starting from FY 2023-24 (AY 2024-25)

NOTE 2 : W.e.f 23rd July 2024, the taxpayers opting for new tax regime from FY 2024-25 can get a higher standard deduction of rs 25000 or 1/3rd of family pension which ever is lower.

Incomes chargeable under the head "Income from other sources" if they are not chargeable under the head "Income from business/profession"

Winnings from Online Games

Income from net winnings from any online games will be taxable under the head "Income from Other Sources"
Rate of Tax: Winnings from Online Games will be taxable @30%
Deductions: No expenditure or allowance or deductions u/s chp VIA or adjustment of unexhausted basic exemption limit is allowed

Refer @ Taxability of winnings from Dream11 or Online Gambling? for more information

3. Special Circumstances

Following incomes will be chargeable under income from other sources if they are not chargeable under income from business/profession.

Income from letting out on hire, machinery or plant and machinery or furniture. Amount spent towards current repairs, insurance and normal depreciation can be claimed against this income
Interest on securities
If letting out buildings is inseparable from letting out of plant & machinery or furniture, the income from such let out is taxable under the head “Income from other sources”
Any amount received by an employer-assessee from his employees as contributions to any provident fund, Superannuation fund or any other fund
Any amount received under a keyman insurance policy by any other person other than the employer who took the policy and the employee in whose name the policy was taken is taxable under the “Income from other sources”

4. Other Circumstances

If shares in a closely held company are received by a firm or another closely held company from any person without consideration or for inadequate consideration, the aggregate fair market value of such shares as reduced by the consideration paid, if any, shall be chargeable to tax.

Note: Nothing would be chargeable to tax if taxable amount doesn’t exceed Rs. 50,000.

If a closely held public company receives any consideration for issue of shares which exceed the fair market value of such shares, the aggregate consideration received for such shares as reduced by its fair market value shall be chargeable to tax.

Note: This provision is not applicable in the following cases :

Where the consideration for issue of shares is received by a venture capital undertaking from a venture capital company or venture capital fund.
Where the consideration for issue of shares is received by company from class or classes of person as notified by the Government.

Any compensation received by a person in connection with the termination of his employment or modification of terms and conditions relating thereto.

Interest received on compensation or enhanced compensation.

Any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset shall be charged to tax.

5. Deductions not allowed for Income from Other Sources

The following deductions cannot be claimed against Income from other sources

Personal expenses of the taxpayer
Any interest which is payable outside India on which tax is not deducted at source
Any Salaries which is payable outside India on which tax is not deducted at source
Expenditure in respect of earning casual income

NOTE: Expenses incurred in respect of activity of owning and maintaining race horses can be claimed even in the absence of stake money.