For India, “individuals with 60 years of human life and above are “recognised” as elderly people. The usual conditions of elderly people either they are retired (if they are employed) or semi-retired, health problems show more and more. At this stage, their financial needs and responsibilities change, making it essential to understand the incomes available to them. It is essential for elderly peopleto stay updated on income opportunities and tax regulations may ensure a secure and comfortable financial future.
Story of two friends
Two friends Mr. Patel and Mr. Pandey were sitting on bench in the park, sipping tea. Mr. Patel asked Mr. Pandey, How are you doing? Mr. Pandey replied, I am getting my pension but still I have to file my ITR! What about you? Mr. Patel replied, I don’t have earning from pension but I have to file my ITR also. Mr. Pandey asked? Are you doing any business? Or you have any property let out? Mr. Patel answered, not at all but I have ‘income from other sources’ and it’s taxable too.
How is Income from Other Sources (IFOS)Taxed in India?
‘Income from Other Sources’ is one of the five heads of income subject to taxation under the Income Tax Act, 1961. Any income that is not covered in the other remaining four heads of income is taxed under income from other sources. It is referred to as residuary head of income. Incomes excluded from salary, house property, business & profession (PGBP) or capital gains are covered in Income from Other Sources, barring incomes that are exempt under the Income Tax Act.
Section 56: Incomes Taxable Only in Income from Other Sources – Criteria
Under Section 56 of the Act, the following three conditions must be satisfied for a receipt of earning to come under the head ‘income from other sources –
1. The assessee must have an income
2. Such income is not tax-exempt under any other Sections of the Income Tax Act 1961
3. Such income cannot be categorized as salary, profits, and gains from business or profession, income from house property, or capital gains
What does ‘Income from Other Sources’ Include?
The following types of receipts of income fall under the Income from Other Sources’ category –
| SN | Source | Descriptions |
| 1 | Dividends | Dividends from Indian companies and foreign companies are taxable in the hands of recipient. |
| 2 | One-time Income | One-time incomes such as winnings from lotteries, horse races, crossword puzzles, card games, gambling or betting of any form are categorized under this head. |
| 3 | Interest on Compensation | Interest received by you (as assessee) on the amount of reimbursement or compensation paid out in situations such as compulsory acquisition is subject to taxation under ‘Income from Other Sources’ head. |
| 4 | Gifts | Gifts received in the form of any sum of money, movable or immovable property exceeding Rs. 50,000, from non-relatives are also taxable. |
| 5 | Interest Income | Interest on SB accounts, FDs, RDs and bonds. Interest on income tax refund. |
| 6 | Family Pension | Pension received by a family member is taxed under the head ‘income from other sources subject to a deduction of 1/3rd of pension or Rs. 15,000 whichever is less. |
| 7 | Rental income from sub-letting | Sub-letting income is taxable under this head. |
| 8 | Income from Royalty or Copyrights | Royalty received by authors and artists is taxable under this head if not treated as business income. |
| 9 | Miscellaneous receipts | These may include Director’s Sitting fees, examination remuneration to faculty members etc. |
| 10 | Any other receipts | Any other income which cannot be classified under any separate head as ‘Salary’, ‘House property’, ‘Capital gain’ and ‘PGBP’ is taxable under this head. |
You know, Mr. Pandey said, I have dividend income, interest income and even director’s sitting fees and since all these exceeding taxable limits, so I’ve to file my ITR. Got it? Mr. Pandey nodded in understanding. Two friends are still taking about taxation but this time with no stress.
Pay attention
- Do understand all your earnings
- Identify heads of income
- Identify it’s taxable or not.
- File ITR within the due date
Closing Memo
Don’t forget to file your ITR even if you have casual or irregular income – who knows it may be taxable under the head ‘Income from Other Sources’.