Unlocking Additional Revenue Streams: Exploring Income From Other Sources

Income from Other Sources covers income, that does not fall under any of the other heads of income. Its covered both Taxable and Exempt income. In this article we are going to explain Income those are taxable in nature:

Interest Income from Saving Account and Fixed Deposits

Interest that gets accumulated in savings bank account and Fixed deposit/recurring deposit whether with Banks, co-operative Societies and post office must be declared in tax return under the head income from other sources. Also deduction U/s 80TTA/TTB can be claimed against this income Terms and conditions apply.

Interest on income tax Refunds 

Where any refund is payable to the assessee, the assessee is entitled to receive interest @0.5% per month or part of the month along with the refund. This Interest on refund of income tax received by a person is taxable in his hands under the head Income from other sources.

Interest Accrued on contribution to Provident fund to the extend taxable as per first and second proviso to section 10(11) and Section 10(12)

The Finance Bill, 2021 proposed the interest income accrued during the previous year in the recognised and statutory provident fund to the extent it relates to the contribution made by the employees over Rs. 2,50,000 in the previous year in case employer is also contributed otherwise Rs. 500000, shall be taxable under the head income from other source. This amendment is applicable from the assessment year 2022-23.
For the purpose of calculation of taxable interest, separate accounts within the provident fund account shall be maintained during the previous years for taxable contribution and non-taxable contribution made by a person.

Family Pension 

In case Family Pension paid as regular monthly income (uncommuted pension) by the employer to a family member of an employee in the event of his/her death then it is taxable under the head “Income from Other Sources.” As per section 57(iia) Family Pension is taxable after allowing a deduction of 33.33% of pension amount or Rs. 15000, whichever is less.
Note : If this pension is commuted or is a lump sum payment, it is not taxable.

Dividend income 

Dividend is an income which received if invest in shares or mutual funds. Many shares and mutual fund schemes distribute the earned returns to investors in the form of dividends. Previously i.e, up to Assessment Year 2020-21, if a shareholder gets dividend from a domestic company then he shall not be liable to pay any tax on such dividend as it is exempt from tax under section 10(34) of the Act subject to Section 115BBDA which provides for taxability of dividend in excess of Rs. 10 lakh. However, in such cases, the domestic company is liable to pay a Dividend Distribution Tax (DDT) under section 115-O.

The Finance Act, 2020 has abolished the DDT and moved to the classical system of taxation wherein dividends are taxed in the hands of the investors. So now, dividend income will become taxable in the hands of taxpayers irrespective of the amount received at applicable income tax slab rates. This dividend taxable under the head “Income from Other Sources.”