Calculate Income Tax on Income from Other Sources
All taxable income under this head is calculated according to the accounting method the assessee follows viz. accrual or cash basis. The exceptions to this are a dividend and interest income i.e. whatever the accounting method, assessees will have to declare and pay tax on dividend and interest earned during the previous year.
The nature of income earned will decide whether income has to be shown under this head. However, there are some standard inclusions as outlined below.
- Dividends: Income by way of dividend is shown under this head. Deemed dividend as under section 2(22)(e) is fully taxable as is a dividend from co-operative societies and foreign companies.
Dividend not chargeable to tax includes dividends exempt U/S 10(34) i.e. dividend from Indian companies, dividend liable to corporate dividend tax, income on mutual fund units or income from UTI unit holder. - Winnings: This includes winnings over Rs.10,000 from lotteries, puzzles, races, games and all forms of gambling and betting. E.g. card games, horse races, game shows etc.
- Interest received: All interest income earned in the previous year (on compensation/enhanced compensation) is taxable. However, 50% of this income can be claimed as deduction.
- Incomes not declared under the head ‘Profits and Gains of Business or Profession’: This includes contributions made to an employer’s employee welfare fund, interest earned on securities, rental income from furniture, plant and machinery (including building where it cannot be let out separately), keyman insurance policy proceeds.
- Gifts: Taxable gifts are declared under this head by individuals and HUFs. This includes monetary or non-monetary items received without any consideration or without adequate consideration. Non-monetary gifts include all immovable property and certain movable property.
Gifts are taxed only if the total amount received during the previous year is more than Rs.50,000 and applies only to those gifts individuals or HUFs received after Oct.1st 2009. This doesn’t apply if the assessee receives money
- from relatives or a local authority or a trust, fund, educational/medical institution, body or any such institution outlined under section 10(23C) and section 12AA
- as a wedding gift
- by way of being named in a Will or as inheritance
- from a dying donor
Gifts include monetary gifts, immovable property and specified property.
Monetary gifts – sums of money received without any consideration or without adequate consideration.
Immovable property as gifts – Property value will be the stamp duty value. Inadequate consideration will be if the property value is lower than stamp duty value.
Specific movable property – Property here are shares, jewellery, securities, paintings, archaeological collections, sculptures and drawings and other artwork. As of 1st June 2010, bullion also forms a part of this list. Property value will be the fair market value. Inadequate consideration is when property value is below fair market value.
Gifts from relatives means gifts from the assessee’s
- parents, parents’ brothers or sisters (i.e. aunts, uncles)
- any lineal predecessor/successor
- brother, sister; brothers’ or sisters’ spouses (i.e. brothers or sisters- in-law)
- spouse, spouse’s parents (i.e. in-laws), spouse’s brothers or sisters (i.e. brothers or sisters- in-law), spouse’s lineal predecessor/successor and their brothers or sisters.
