Taxpayers often ignore different types of income while filing their income tax returns. These incomes fall under ‘income from other sources’ category. This may happen due to the taxpayer’s unawareness about the taxability of such income or they hiding it intentionally from the tax authorities.
There are several heads of income like income from salary, income from capital gains, income from profession and business and income from house property for which you need to file ITR. There are, however, certain types of income that fall under the head ‘income from other sources’.
Income that comes under the income from other sources head must satisfy certain conditions. Firstly, income shouldn’t be exempt under the provisions of the I-T Act, and secondly, income should not fall under any other income head.
Incomes Falling under the Head Income from Other Sources
Let’s take a look at such incomes that can be mentioned under this head:
- Other incomes: Interest on loans, interest received on unrecognisable PF, recurring deposits, interest received on delayed refund, National Savings Certificate, Senior Citizens Saving Scheme, rent from a vacant piece of land, Post Office Savings Scheme, interest received on bank deposits/ deposit with companies, income made in the form of insurance commissions and some perquisites fall under income from other sources
- Dividend income: Dividends received from mutual funds and a domestic company are exempt from tax. However, if the dividend received from a domestic company is more than Rs. 10 lakh then the amount will be taxable at 10 percent. Moreover, the dividends received from a foreign company are taxable under the head income from other sources.
- Gifts: Income made in the form of gift that exceeds Rs. 50,000 without proper consideration is taxable. However, if you receive a gift from a person and he qualifies as a relative under the Income Tax Laws, it is exempted from tax.
- Interest on securities: Interest income earned through investment in securities will be taxable under this head.
- Pension received by legal heirs of deceased: Pension received by legal heirs of a deceased person is taxable but not fully. They can claim a deduction on the amount @33.3 % or Rs. 15,000 whichever is less.
- The amount received from winning lotteries, horse races, gambling, etc.: Any income received from winning lotteries, horse races, gambling and card games, etc., fall under this head, which is fully taxable at 30%.
Consequences of Ignoring Other Sources of Income
It is important to match your income details with your Form 26AS to avoid any mismatch in the ITR filing. This can result in the following consequences:
- You may receive a notice from I-T Department.
- If you claim TDS but fail to report interest income, the Assessing Officer will consider your return as defective and will send a defective return notice under section 139(9).
- If the A.O. determines that you have misreported or under-reported your income, then you will have to pay taxes due along with interest u/s 234B and 234C. He can even impose a penalty from 50 percent to 200 percent for misreporting or under-reporting of income u/s 270A.