Income from other sources is a residual category used to classify income that is not classified taxed under any other head of income. Income from other sources must be calculated by the taxpayer based on the mercantile system used by the taxpayer, i.e cash basis or accrual basis.
Items Classified as Income From Other Sources
Apart from income that cannot be classified under any other heads, there are certain types of incomes which are always taxed under income from other sources. Such incomes are as under:
- Dividends are always taxed under income from other sources. However, dividends from domestic company are normally exempt from tax, as the company declaring dividend pays dividend distribution tax.
- Winnings from lotteries, crossword puzzles, races including horse races, card game and other game of any sort, gambling or betting of any form is classified as income from other sources.
- Interest received on compensation or on enhanced compensation is taxed under the head “Income from other sources”.
- Gifts received by an individual or HUF (which are chargeable to tax) are also taxed under this head.
The following types of income can be classified as Income from Other Sources, if it is not taxed under the head “Profits and gains of business or profession”:
- Any contribution to a fund for welfare of employees received by the employer.
- Income received by way of interest on securities.
- Income from letting out or hiring of plant, machinery or furniture.
- Income from letting out of plant, machinery or furniture along with building; both the lettings are inseparable.
- Money received under a Keymen Insurance Policy including bonus.
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