You’ve probably heard a lot about income from salary, business, or even capital gains. But what about all those other earnings—like lottery winnings, dividends, or interest on fixed deposits? Where do they fit in the world of taxes?
That’s where the term “Income from Other Sources” comes into play. It’s the most flexible and often misunderstood head of income under the Income Tax Act. Think of it as the government’s way of saying, “If we haven’t covered it elsewhere, we’ll cover it here”.
From gifts and interest income to casual winnings and family pensions, this category captures all kinds of earnings you might overlook—but the tax department definitely doesn’t. And if you’re not reporting it properly, you might be setting yourself up for notices, fines, or even worse.
This blog will break down everything you need to know—from the legal meaning and types of income included under this head to how and where you need to report it in your tax return (including under Section 56). Let’s demystify the “other” in your income!
What is Income from Other Sources?
“Income from Other Sources” is like a catch-all drawer in your tax filing. It includes any income that doesn’t fall under the four major heads:
- Income from Salary
- Income from House Property
- Profits and Gains of Business or Profession
- Capital Gains
Anything that doesn’t fit neatly into those categories but is still taxable ends up here. It’s governed by Section 56 of the Income Tax Act, which ensures that even non-traditional earnings are taxed appropriately.
Types of Income from Other Sources Under the Income Tax Act
Here’s a breakdown of the most common (and a few surprising) types of income taxed under this head:
1. Interest Income
- Fixed deposits, recurring deposits, savings accounts
- Bonds and debentures
- Corporate or government securities
2. Dividend Income
- Received from domestic or foreign companies
- Mutual funds (dividends from equity funds are now taxable)
3. Winnings
- Lottery, crossword puzzles, card games, betting, and any sort of gambling
- Taxed at a flat rate of 30% without any deductions allowed
4. Gifts
- Received from non-relatives exceeding ₹50,000 in value
- Wedding gifts or inheritance are usually exempt
5. Rental Income (Not from House Property)
- Let’s say you rent out a parking space or a generator—this doesn’t qualify as “house property” and is taxed here
6. Family Pension
- Pension received by legal heirs of a deceased employee
7. Income from Subletting
- If you’re subletting a property, your income from the sublease falls under this category
8. Interest on Compensation or Enhanced Compensation
- Interest received on delayed compensation in land acquisition is covered here
9. Forfeited Advance on Property
- If someone pays you an advance for property and backs out, the forfeited amount is taxable under this head
10. Any Other Residual Income
- Directors’ sitting fees, insurance commission, income from undisclosed sources, etc.
Tax on Income from Other Sources: Rates & Applicability
The tax rate for income under this head depends on the nature of the income:
| Income Type | Tax Rate |
| General Income (e.g., FD interest, dividends) | Taxed as per applicable income slab |
| Winnings (lottery, gambling) | Flat 30% + surcharge + cess (no deductions allowed) |
| Gifts above ₹50,000 | Taxed as per slab (if not exempt) |
| Family Pension | Deduction up to ₹15,000 or 1/3rd (whichever is lower), rest taxed as per slab |
Also note:
- No deductions under Section 80C are allowed for winnings or gifts.
- Interest income from FDs can be declared even if Tax Deducted at Source (TDS) is already applied by the bank.
How to Report Income from Other Sources in ITR
Reporting this income properly is crucial—not only to stay compliant but also to avoid notices from the tax department. Let’s break it down based on the return forms.
Where to show in ITR-1/ITR-2
- ITR-1 (Sahaj): Use this if your income includes salary, one house property, and income from other sources (excluding winnings, lottery, or capital gains).
- ITR-2: Use this if you have other types of income like winnings, capital gains, or foreign income—or if your income exceeds ₹50 lakh.
Look for the section labeled “Schedule OS” (Other Sources) in your ITR.
You’ll need to provide:
- Type of income (interest, dividends, gifts, etc.)
- Amount received
- TDS deducted (if any)
- PAN of the deductor (for verification)
- Any relevant remarks or description
Step-by-Step Guide for Entry
Here’s a quick walkthrough:
- Log in to the income tax e-filing portal
- Select “File Income Tax Return” and choose the relevant Assessment Year
- Choose the correct form (ITR-1 or ITR-2)
- Go to “Income Details” → Select Schedule OS (Other Sources)
- Enter each income type separately
- Include TDS details under the “Tax Details” section
- Review and proceed to verify and file
Pro Tip: Don’t forget to reconcile Form 26AS and Annual Information Statement (AIS) with your entries. Mismatches can delay your refund or trigger scrutiny.
Problems and Solutions While Filing Income from Other Sources
Here are some common issues—and how you can handle them:
| Problem | Solution |
| Forgot to include FD interest | Recheck Form 26AS and AIS before filing |
| TDS deducted but not showing in Form 26AS | Follow up with deductor and request correction |
| Unsure which ITR form to choose | Use ITR-2 if income is from winnings or foreign sources |
| Declared income but refund delayed | Mismatch in TDS or under-reporting; double-check all fields |
| Confused between “House Property” vs “Other Sources” | If it’s not rent from residential/commercial property, it likely goes under “Other Sources” |
Section 56 of Income Tax Act: Legal Provisions
Section 56 is the legal backbone of the “Income from Other Sources” category. Here’s what it covers:
Key Subsections
- Section 56(2)(vii): Taxation of gifts from non-relatives
- Section 56(2)(viib): Premium received by companies on shares issued to residents (beyond fair market value)
- Section 56(2)(x): Tax on gifts above ₹50,000 in cash/kind/property (if not exempt)
- Section 56(2)(ib): Winnings from lotteries, card games, horse races, etc.
- Section 56(2)(viii): Income from interest on compensation
These provisions ensure that even indirect or less visible incomes get taxed fairly. They also act as anti-abuse mechanisms—especially to curb money laundering by taxpayers through gifts or inflated share valuations.
If you’re receiving large gifts, buying unlisted shares, or earning from casual winnings, Section 56 is your playbook.
Conclusion
Let’s face it—income from other sources sounds like a catch-all category you might miss or overlook due to ambiguity. But in reality, it’s where a lot of your real-world earnings sneak in—like that FD interest, cash gift from a friend, or your winnings from a lucky scratch card.
And the tax department? It’s definitely paying attention.
Now that you know what falls under this category, how it’s taxed, and how to report it properly, you’ve already won half the battle. The other half is just about staying proactive—check your Form 26AS and Annual Information Statement regularly, choose the right ITR form, and disclose even the oddest income (like subletting your parking space).
The beauty of the Indian tax system is that it leaves little to chance—and that’s a good thing when you’re trying to stay compliant and avoid surprises later.
FAQs
Is interest from fixed deposits taxable as income from other sources?
Yes, interest earned from fixed deposits is fully taxable under “Income from Other Sources”. It’s added to your total income and taxed as per your applicable slab rate. Even if the bank deducts TDS, you still need to declare the full interest in your income tax return.
Are gifts received taxable under income from other sources?
Yes, gifts are taxable under “Income from Other Sources” if their total value exceeds ₹50,000 in a year and they’re received from non-relatives. However, gifts received on occasions like marriage, inheritance, or from specified relatives are fully exempt from tax.
How do I report income from other sources in ITR 1?
In ITR-1, report “Income from Other Sources” in the relevant section under ‘Income Details’. Enter each income type—like interest or family pension—separately. Ensure the amounts match Form 26AS or AIS. If you have winnings or gifts, you may need to switch to ITR-2 instead, as ITR-1 has limitations.
Is family pension considered income from other sources?
Yes, family pension is taxed under “Income from Other Sources”. You can claim a deduction of one-third of the pension amount or ₹15,000—whichever is lower. The remaining amount is added to your income and taxed as per your applicable slab rate.
Can I claim deductions against income from other sources?
Yes, you can claim certain deductions against income from other sources. For example, you can deduct expenses directly related to earning that income—like bank commission or interest paid to earn interest income. However, these deductions must be reasonable and properly documented to be allowed by the tax department.
Discover fixed income investments with Jiraaf, a SEBI registered online bonds platform that educates and brings access to a wide array of bonds. Sign up today to explore diversified fixed income investment opportunities to support your goal-based wealth creation journey. Start investing!
