Income From Other Sources-FAQs

Understanding Income from Other Sources & Gift Tax – FAQs (FY 2024-25)

Not every income fits neatly under salary, business, or capital gains — that’s where “Income from Other Sources” (IFOS) applies. This head covers interest, dividends, gifts, winnings, and miscellaneous receipts. These FAQs explain how income from other sources and gifts is taxed under the Income-tax Act, 1961, exemptions available, and filing tips for FY 2024-25.

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Frequently Asked Questions-Income from Other Sources

It’s a residual head of income that includes any taxable income not covered under the other four heads (Salary, House Property, Business/Profession, or Capital Gains). Section 56 governs it.

Interest on savings or fixed deposits, dividends, lottery winnings, gifts, family pension, casual income, and certain insurance receipts.

Yes. As per Section 56(2)(x), gifts exceeding ₹ 50,000 in a year (cash, property, shares, or other assets) received without consideration are taxable as income from other sources — unless exempt under specific relationships or occasions.

Gifts received:

  • From relatives (spouse, parents, siblings, lineal ascendants/descendants, etc.)
  • On marriage of the individual
  • Under a will or inheritance
  • From local authorities or approved trusts (e.g., registered under 12AA/12AB)

Yes, if the total value of gifts from non-relatives exceeds ₹ 50,000 during a financial year, the entire amount (not just the excess) is taxable under “Income from Other Sources.”

Taxable under “Other Sources” at slab rates. Banks deduct TDS u/s 194A if interest > ₹ 40,000 (₹ 50,000 for senior citizens). Report interest in your return even if TDS is deducted.

Since FY 2020-21, dividends are taxable in the hands of shareholders/unit-holders under “Other Sources.” Companies/MFs deduct TDS @ 10 % u/s 194 or 194K.

Yes. Lottery, crossword, horse race or online-gaming winnings are taxed at a flat 30 % u/s 115BB, plus cess/surcharge, without deductions. TDS @ 30 % applies at source.

Taxable under “Other Sources,” but a deduction of one-third of such income or ₹ 15,000, whichever is lower, is allowed u/s 57(iia).

Only those incurred wholly and exclusively for earning that income are allowed — e.g., collection charges on dividends, commission for realizing interest. Personal expenses aren’t deductible.

If received without or for inadequate consideration, fair-market value (FMV) exceeding ₹ 50,000 is taxable as income from other sources u/s 56(2)(x).

Yes. For Indian residents, global gifts are taxable unless covered by the “relative” exemption. For non-residents, only Indian-source gifts are taxable.

Unless related to business or capital transactions, they fall under this head. Example: signing bonus, referral rewards, casual reimbursements not linked to employment.

Maturity proceeds of life-insurance policies are exempt u/s 10(10D) subject to premium-to-sum-assured ratios; otherwise, taxable under “Other Sources.”

Individuals with IFOS use ITR-1, ITR-2, or ITR-3 depending on other incomes. For example, ITR-1 covers “income from salary + one house property + other sources” within limits.

Interest certificates, Form 16A, bank statements, gift deeds or declarations, TDS statements (26AS/AIS/TIS), and correspondence proving relationship in case of exempt gifts.

Pro Tips

  • Declare all interest income even if TDS is deducted — match it with AIS.
  • Keep a gift deed (even for exempt gifts) for clarity during scrutiny.
  • Track multiple small gifts — aggregate to ₹ 50,000 threshold yearly.
  • Verify that dividends and interest auto-reflect in Form 26AS / AIS.
  • For foreign gifts, evaluate DTAA and FEMA reporting implications.

Quick Checklist before filing

1️⃣ Compute total taxable “Other Sources” income (interest + dividends + taxable gifts).
2️⃣ Claim allowable deductions u/s 57.
3️⃣ Confirm TDS credits in Form 26AS.
4️⃣ Retain documents & gift proofs.
5️⃣ Choose correct ITR form (usually ITR-1/ITR-2).

Related Resources

Professional is reading the FAQ on Income from other sources

Is Your Gift Tax-Free or Taxable? Understand Income from Other Sources under the Income-tax Act

Sources

Frequently Asked Questions-CBDT IncomeTax.Gov.In

Disclaimer: These FAQs on Income from Other Sources and Gifts are for general information based on the Income-tax Act, 1961 as amended by the Finance Act 2025. They are not professional advice. Refer to the official income-tax portal or consult a qualified CA for case-specific guidance.