Income From Other Sources: Meaning, Tax Rate & Examples

What is Income From Other Sources?

At Ultra, India’s trusted digital investment platform getultra.club, we help you understand all aspects of your income — including lesser-known parts like ‘Income from Other Sources’ under the Income Tax Act.

Not all your earnings come from salary or business — sometimes, you receive interest, dividends, lottery winnings, or gifts. These are taxed under the head ‘Income From Other Sources’ (IFOS). Let’s break this down, see 15 real-life examples, and understand how it is taxed.

Income From Other Sources is a residual head of income under Section 56 of the Income Tax Act, 1961. Any income not taxable under:

• Salary,

• House Property,

• Business or Profession,

• Capital Gains,

is taxed under Income From Other Sources.

This ensures no income escapes taxation, keeping your tax return accurate and compliant.

Income From Other Sources Tax Rules

Income taxed under this head is added to your total income and taxed at applicable slab rates for individuals/HUFs. For companies and firms, normal tax rates apply.

However, some incomes under this head have special tax rates:

• Lottery winnings, game show prizes, horse race winnings: taxed flat at 30% (plus surcharge & cess), without any deductions.

• Dividend income: taxable in hands of recipient as per slab rates (after the abolition of DDT).

• Gifts above ₹50,000 in a year from non-relatives are fully taxable, with certain exemptions.

Key Sections for Income From Other Sources

• Section 56(1): Main provision for residual income.

• Section 56(2): Specifies certain incomes specifically included.

• Section 57: Deductions allowed against IFOS.

• Section 58: Expenses not allowed as deductions.

Income From Other Sources Format

When filing your Income Tax Return (ITR), you’ll enter these incomes in the IFOS section in ITR-1 or ITR-2. Format usually asks for:

• Type of income (e.g., interest, dividend)

• Gross amount

• Deductions under Section 57 (if any)

• Net taxable amount

What Can You Deduct Under IFOS?

Section 57 allows some expenses to be deducted:

• Commission/remuneration for realizing dividend/interest.

• Family pension: Standard deduction of 1/3rd or ₹15,000, whichever is lower.

• Deduction of expenses for earning rental income from plant/machinery.

• Any interest paid to earn interest on securities.

Example: If you paid an agent 1% commission to collect dividend income, that commission can be deducted.

How is Lottery or Game Show Income Taxed?

If you win a lottery or TV game show:

Flat 30% tax under Section 115BB.

No deduction of any expenses allowed except TDS.

Must declare in IFOS.

Gifts & Income From Other Sources

As per Section 56(2)(x), if you receive money/property from a non-relative:

• Entire amount is taxable if total exceeds ₹50,000 in a year.

• Gifts at marriage, by will, or inheritance are exempt.

Income From Other Sources in India

In India, millions of taxpayers earn small amounts through interest, gifts, or casual income. Many forget to declare these — but not disclosing can invite notices from the tax department.

Platforms like Ultra help investors plan for taxes properly. You may also read our related tax guides:

• Difference Between Tax Planning and Tax Evasion

• Personal Tax Planning Strategies

• Direct and Indirect Tax Differences in India

FAQs on Income From Other Sources

What is income from other sources in India?

Any income not covered under salary, house property, business/profession, or capital gains is taxed as ‘Income From Other Sources’.

What is the tax rate for income from other sources?

Generally taxed at your normal slab rate. Exceptions include lottery winnings and race winnings, taxed at 30% flat.

Can I claim deductions under income from other sources?

Yes, only certain expenses under Section 57, like collection charges, can be claimed.

What is an example of income from other sources?

Interest from fixed deposits, dividends, lottery prizes, rent from sub-letting, or gifts from non-relatives.

Is dividend income taxable under IFOS?

Yes. Dividend income is taxable under IFOS after DDT abolition.

Conclusion

Knowing how ‘Income From Other Sources’ works helps you file accurate ITRs and avoid penalties. Keep proper records, declare everything honestly, and plan your taxes smartly.

For more tax planning ideas and smart investments, explore Ultra — your one-stop solution for growing and protecting wealth.