How to Calculate Income Tax on Income from Other Sources?

There are five heads of sources of Income under Income Tax 1961. Income from other sources is one the 5 heads which includes earning that cannot be considered in any of the other four categories i.e., Salary, Income from house Property, Income from capital Gains and Profits and gains from business and profession. The income taxable is either on cash or accrual basis.

The income taxable under this head is income from the following sources:

Dividends: Dividend income comes under the same head. U/S 2(22) (e), deemed dividend is entirely taxable if earned from Co-operative and foreign companies. However, U/S 10(34), the dividend from Indian companies, dividend liable to income on mutual fund units' corporate dividend tax, or income from UTI unit holder are exempt from tax. Dividends and interest income rely as exceptions as the assesse has to pay dividend and interest earned during previous year

Winnings: Earning over ₹10,000 from winnings like puzzles, Races, lotteries, gambling, betting like card games, horse race, etc. is taxable.

Interest received: Interest earned in the previous year is taxable with a deduction claim of 50%.

Income not declared under profits and gains from business and profession: income where contribution made to employer employee welfare fund, interest on securities, furniture rental income, plant and machinery, insurance proceeds are taxable.

Gift: The gift earned by individuals and HUFs be it monetary or non-monetary item received without consideration is taxable. Non-monetary gifts include both movable and immovable property.

The gifts, however, can be taxed only if the total amount in the previous year exceeds ₹50,000. This gift received by individuals and HUFs only after 1 Oct 2009 are applicable to pay tax. Furthermore, this does not apply if assesse earns money from the following areas:

  • Relative, local authority, trust, fund, educational institution, medical institution, or any other body outlines U/S 10(23C) and section 12AA.
  • Wedding gift
  • From a dying donor
  • Will or inheritance

The gifts can be in the form of monetary gifts, movable or immovable property.

Monetary gifts: Amount received without adequate consideration.

Immovable property as gift: The property value with be taken as stamp duty value. The inadequate consideration will be considered if it is lower than stamp duty value.

Movable property: Property like Shared, Securities, jewelleries, paintings, drawings, archaeological sculptures, etc. is a part of the list. The property value will be fair market value or inadequate consideration whichever is less.

Gifts received from relatives of the assesse means:

  • Parents, brothers and sisters of Parents
  • Lineal predecessor or successor
  • Brother, sisters, or their spouses
  • Spouses parents, brother, sister, brother in law, sister in law, success or predecessor.
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