Income from Other Sources Under the Income-tax Act, 2025 — Complete Guide
Quick Answer
Income from Other Sources is the fifth and residuary head of income under the Income-tax Act, 2025 (30 of 2025), which received Presidential assent on 21 August 2025 and commenced on 1 April 2026. Any income that is taxable but does not fit into the other four heads — Salaries, House Property, PGBP, or Capital Gains — falls here. It covers interest, dividends (fully taxable at slab rates), gifts exceeding ₹50,000 from non-relatives, lottery and gambling winnings (flat 30%), family pension, interest on enhanced compensation, forfeited advances on property, and various deemed incomes. This guide explains every sub-head for the first tax year under the new Act — tax year 2026-27.
Last Updated: 15 April 2026 | Applicable From: Tax Year 2026-27 (1 April 2026 onwards) | Reference: Income-tax Act, 2025 (30 of 2025), as amended by Finance Act, 2026
When the Income-tax Act, 2025 replaced the six-decade-old Income-tax Act, 1961, the five-head classification of income was preserved. Chapter IV of the new Act retains Salaries, House Property, Profits and Gains of Business or Profession, Capital Gains, and Income from Other Sources as the statutory heads. Of these, Other Sources is the residuary bucket — it catches everything that is legally taxable but does not belong to any of the first four heads. Despite being residuary, it is one of the most commonly misreported heads in Indian tax returns and a frequent trigger for scrutiny and adjudication under the new Act’s Chapter XVI assessment procedure.
This guide is written for the salaried individual checking interest and dividend taxation, the retiree computing family pension, the property seller dealing with forfeited advances, the founder receiving a monetary gift at a wedding, the casual winner of a TV show, and the practising Chartered Accountant advising any of the above. Every rule is stated as it applies to tax year 2026-27 — the first tax year under the Income-tax Act, 2025.
Definition — Income from Other Sources: The residuary head under Chapter IV of the Income-tax Act, 2025. Any income chargeable to tax which is not computable under any of the other four heads (Salaries, House Property, PGBP, Capital Gains) is computed under this head. The head catches specific items listed in the charging provision as well as the general residue.
Definition — Tax Year: A period of twelve months commencing on 1 April. Under the Income-tax Act, 2025, the concept of “tax year” replaces the earlier dual concepts of “previous year” and “assessment year”. The first tax year under the new Act is the tax year 2026-27, beginning 1 April 2026 and ending 31 March 2027.
Eight broad categories: (1) interest income from savings accounts, FDs, bonds, and refunds; (2) dividends from domestic and foreign companies (fully taxable at slab rates — DDT was abolished); (3) gifts of money or property exceeding ₹50,000 from non-relatives; (4) lottery, gambling, and TV game show winnings at a flat 30%; (5) family pension with a standard deduction of ₹25,000 or one-third of pension, whichever is lower; (6) royalties earned casually and not as business; (7) forfeited advances from unsuccessful property negotiations; and (8) various deemed incomes under the Sec 56(2) equivalents of the 2025 Act. The Act carries forward most of the substantive rules from the 1961 Act but restructures them into cleaner statutory language.
Table of Contents
- Scope of the fifth head under the 2025 Act
- Interest income — bank, FD, bonds, refund
- Dividends — domestic, foreign, mutual fund
- Gifts — the ₹50,000 threshold explained
- Lottery, gambling and TV game show winnings
- Family pension and retirement payouts
- Deemed incomes under Sec 56(2) equivalents
- Interest on enhanced compensation
- Forfeited advances on property transfers
- Allowable deductions against Other Sources
- TDS applicable on Other Sources income
- Reporting in the ITR — Schedule OS
- Expert Insight
- Key Takeaways
- Frequently Asked Questions
1. Scope of the fifth head under the 2025 Act
The Income-tax Act, 2025 preserves the residuary character of the fifth head. Income is charged under Other Sources if (a) it is taxable, (b) it does not qualify as Salary (no employer-employee relationship), (c) it is not House Property income, (d) it does not arise from a business or profession carried on by the assessee, and (e) it is not a capital gain from the transfer of a capital asset.
The charging provision for the head in the 2025 Act mirrors the structure of the old Sec 56 of the 1961 Act. It lists specific items that are always taxed under this head (for example, dividends, winnings from lotteries and gambling, interest on securities when not chargeable under PGBP) and also empowers the Assessing Officer to bring any residual income within its net. Rentals from plant, machinery, or furniture let out (where letting is not a business) also fall under this head.
How the 2025 Act differs from the 1961 Act for this head
The head’s substantive coverage is virtually unchanged, but several important points of detail have been cleaned up in the new Act:
- Angel tax abolished: The old Sec 56(2)(viib) — which taxed share premium in excess of fair market value received by a closely held company from a resident or non-resident investor — is not carried forward into the 2025 Act. This is a major relief for startups and venture capital transactions.
- Family pension deduction enhanced: The standard deduction on family pension has been enhanced to ₹25,000 (up from ₹15,000 under the old regime of the 1961 Act) for taxpayers electing the new regime under the 2025 Act.
- Dividend taxation retained: Dividends continue to be taxable in the hands of the shareholder at slab rates, with 10% TDS under the Sec 194 equivalent beyond ₹10,000 per tax year. DDT has not been reintroduced.
- VDA excluded: Income from the transfer of Virtual Digital Assets (cryptocurrency, NFTs) is taxed as a separate standalone category under Sec 2(111) of the new Act at a flat 30% — it is NOT Income from Other Sources despite its residuary feel.
- Terminology: The Act uses “tax year” consistently instead of the dual “previous year / assessment year” terminology.
2. Interest income — bank, FD, bonds, refund
Interest is by far the largest component of Income from Other Sources for most Indian individuals. The 2025 Act taxes the following interest items under this head when the assessee does not carry on a banking or money-lending business:
- Interest on savings bank accounts (taxable; partial deduction available under the old regime via the Sec 80TTA equivalent up to ₹10,000, or Sec 80TTB for senior citizens up to ₹50,000)
- Interest on fixed deposits, recurring deposits, and term deposits with banks or post offices
- Interest on Kisan Vikas Patra, National Savings Certificates, Indira Vikas Patra
- Interest on taxable bonds, debentures, and corporate deposits
- Interest on income tax refund received from the Department
- Interest on employee provident fund contributions above the prescribed monetary threshold (the excess portion is taxable as Other Sources)
- Interest on enhanced compensation — taxable in the year of receipt with a 50% deduction
Exempt interest items
- Interest on Sukanya Samriddhi Yojana, Public Provident Fund, Employees’ Provident Fund (within contribution limits)
- Interest on tax-free bonds specifically notified by the Central Government
- Interest earned on Senior Citizen Saving Scheme is taxable but eligible for the Sec 80TTB deduction under the old regime
Mr. Raj, aged 45, has a salary of ₹18,00,000 in tax year 2026-27. He also earns: savings bank interest ₹9,800, FD interest ₹72,000, interest on income tax refund ₹4,500, and interest on a Government bond ₹18,000.
Computation (new regime — default):
Interest income aggregate: ₹9,800 + ₹72,000 + ₹4,500 + ₹18,000 = ₹1,04,300
Under the new regime, the savings bank interest deduction (Sec 80TTA equivalent) is NOT available. The entire ₹1,04,300 is added to salary income and taxed at slab rates. TDS on FD interest at 10% (₹7,200) is available as credit.
3. Dividends — domestic, foreign, mutual fund
Dividend Distribution Tax (DDT) was abolished with effect from tax year 2020-21 under the 1961 Act, and the abolition is carried forward into the Income-tax Act, 2025. Dividends received from domestic companies, foreign companies, and dividend-paying mutual funds are fully taxable in the hands of the shareholder or unitholder at their applicable slab rate under Income from Other Sources.
- Domestic company dividends: Taxable at slab rates; 10% TDS deducted at source under the Sec 194 equivalent if aggregate payment to a shareholder exceeds ₹10,000 in a tax year.
- Foreign company dividends: Taxable at slab rates; DTAA relief available where the source country has also taxed the dividend. Double Taxation Relief under the Sec 90/90A equivalent applies.
- Equity and debt mutual fund dividends (IDCW plans): Taxable in the unitholder’s hands at slab rates; TDS at 10% under the Sec 194K equivalent beyond ₹5,000.
- Deemed dividend: Loans or advances to a shareholder with substantial interest, or to a concern in which such a shareholder has substantial interest, can be treated as deemed dividend under the Sec 2(22)(e) equivalent and taxed in the recipient’s hands.
Taxpayers should cross-check dividend income against the data pre-filled in their ITR from the Annual Information Statement (AIS). Missing even a small dividend receipt can trigger an intimation under the Sec 143(1) equivalent of the new Act’s Chapter XVI.
4. Gifts — the ₹50,000 threshold explained
The 2025 Act carries forward the gift taxation rule from the 1961 Act’s Sec 56(2)(x). Any sum of money, immovable property, or specified movable property received by an individual or HUF without consideration (or for inadequate consideration) is taxable as Income from Other Sources if the aggregate value in a tax year exceeds ₹50,000.
| Asset type | Without consideration | Inadequate consideration |
|---|---|---|
| Money (cash, cheque, transfer) | Fully taxable if aggregate > ₹50,000 | N/A |
| Immovable property | Stamp duty value taxable if > ₹50,000 | Difference between stamp duty value and consideration, if gap > ₹50,000 or 10% of consideration |
| Specified movable (shares, jewellery, bullion, paintings, sculptures, archaeological) | Fair market value taxable if aggregate FMV > ₹50,000 | Difference between FMV and consideration if gap > ₹50,000 |
Exemptions — gifts that are NOT taxable
- Gifts from relatives — spouse, brother/sister (and their spouses), brother/sister of spouse, brother/sister of parents, any lineal ascendant or descendant (and their spouses) — exempt without any limit
- Gifts received on the occasion of marriage of the individual (not birthdays, anniversaries, or festivals)
- Gifts received under a will or by inheritance
- Gifts received in contemplation of death of the donor
- Gifts from a local authority or any fund, foundation, or educational institution registered under the Sec 12A/10(23C) equivalents
- Distribution of HUF assets among members on total or partial partition
- Property received from a trust or institution registered under the Sec 12A equivalent
5. Lottery, gambling and TV game show winnings
Winnings from specified sources are charged to tax at a flat rate of 30% (plus surcharge and 4% health and education cess) under the Income-tax Act, 2025:
- Lotteries and crossword puzzles
- Races including horse races
- Card games and other games of any sort
- Gambling and betting of any form or nature
- TV game shows, quiz shows, and similar competitions
- Online gaming and fantasy sports (subject to specific provisions)
Special rules for this category:
- The flat 30% rate applies regardless of slab — a poor individual who wins ₹1 crore pays the same 30% as a high-income winner
- No basic exemption — not even the ₹2.5 lakh / ₹4 lakh basic exemption limits apply
- No deduction of any expenditure is allowed, even if the taxpayer incurred costs to earn the winning
- No Chapter VIII deductions (e.g. Sec 80C equivalent) can be set against winnings
- No set off of losses from any other head against winnings
- TDS at 30% is deducted under the Sec 194B/194BB/194BA equivalents. For prizes in kind (cars, gold, furniture), the TDS must be paid in cash before the prize is handed over
6. Family pension and retirement payouts
The distinction between pension and family pension matters for tax treatment under the 2025 Act:
- Pension — received by a retired employee himself or herself — is taxable under the Salary head. The standard deduction of ₹75,000 is available under the new regime.
- Family pension — received by the legal heirs or nominees of a deceased employee — is taxable under Income from Other Sources. A special deduction is allowed: ₹25,000 or one-third of the family pension, whichever is lower under the new regime (up from ₹15,000 under the earlier rules of the 1961 Act).
- Family pension received by family members of armed forces personnel who died in the course of operational duties is fully exempt.
7. Deemed incomes under Sec 56(2) equivalents
The 2025 Act carries forward several deemed income provisions:
- Interest on securities when not chargeable under PGBP
- Rent from plant, machinery, or furniture let out where the letting is not part of a business
- Composite letting of building with plant, machinery, or furniture, where the two lettings are inseparable
- Keyman insurance policy sums received, if not chargeable as Salary or PGBP
- Advance money forfeited on capital asset negotiations
- Sums received from employer on termination of employment where not covered by Salary rules
8. Interest on enhanced compensation
When land is compulsorily acquired by the Government or a local authority and compensation is subsequently enhanced by a court or tribunal, the enhanced compensation is taxable as Capital Gains. However, the interest on enhanced compensation is taxable as Income from Other Sources in the year of receipt, not on accrual. A flat 50% deduction is allowed, and no further deduction is permitted.
9. Forfeited advances on property transfers
Under the 2025 Act, any advance or earnest money received and subsequently forfeited in the course of negotiations for the transfer of a capital asset that ultimately does not materialise is taxable as Income from Other Sources in the tax year of forfeiture. The forfeited amount cannot later be reduced from the cost of acquisition when the asset is eventually transferred.
10. Allowable deductions against Other Sources
Limited deductions are allowed against Income from Other Sources under the 2025 Act:
- Any expenditure (not capital or personal) incurred wholly and exclusively for earning the income — e.g. commission paid to collect dividends, bank collection charges on interest
- Standard deduction on family pension — ₹25,000 or 1/3rd, whichever is lower
- 50% deduction on interest on enhanced compensation
- Depreciation on assets used for earning Other Sources income (limited cases)
No deduction is allowed against lottery, gambling, and TV game show winnings (flat 30% rate with no exceptions).
11. TDS applicable on Other Sources income
| Income type | TDS section | Rate | Threshold |
|---|---|---|---|
| Dividend (domestic company) | Sec 194 equivalent | 10% | ₹10,000 per tax year |
| Bank FD/RD interest (non-senior) | Sec 194A (banks) | 10% | ₹40,000 per tax year |
| Bank FD/RD interest (senior citizen) | Sec 194A (banks) | 10% | ₹50,000 per tax year |
| Non-bank interest | Sec 194A (non-bank) | 2% (rationalised) | ₹5,000 per tax year |
| Lottery/crossword winnings | Sec 194B equivalent | 30% flat | ₹10,000 per payment |
| Online gaming winnings | Sec 194BA equivalent | 30% flat on net winnings | No threshold |
| Horse race winnings | Sec 194BB equivalent | 30% flat | ₹10,000 per payment |
| Mutual fund dividend (IDCW) | Sec 194K equivalent | 10% | ₹5,000 per tax year |
12. Reporting in the ITR — Schedule OS
All Income from Other Sources is reported in Schedule OS of the applicable ITR form. Pre-filled data from the Annual Information Statement (AIS) and Form 26AS must be reconciled line-by-line. Mismatches are a leading trigger for intimation notices and scrutiny under the Chapter XVI assessment procedure of the 2025 Act. For further reading, see our guide on income tax assessment types under the 2025 Act.
Expert Insight
CA V. Viswanathan: In fifteen years of direct tax practice, I have found that Income from Other Sources is where most honest taxpayers make honest mistakes. People remember to report their salary to the rupee, but they forget the ₹4,500 interest on an income tax refund received three years ago, or the ₹18,000 FD interest from a dormant account. Under the Income-tax Act, 2025, the Annual Information Statement is comprehensive and near real-time — the Department sees every bank interest, every dividend, every refund interest, every high-value gift, and every winning. My recommendation to every client filing for tax year 2026-27 onwards is to download the AIS first, use it as the starting point for Schedule OS, add any items the AIS does not capture (for example, a gift from a non-relative friend), and then verify every line against bank statements. The cost of this exercise is 30 minutes. The cost of not doing it is a scrutiny notice, penalty of 50% of tax on under-reported income under Chapter XXI of the new Act, and years of correspondence. Get it right the first time.
Key Takeaways
- Income from Other Sources is the fifth and residuary head under the Income-tax Act, 2025 (30 of 2025), commencing 1 April 2026
- First applicable year is tax year 2026-27, not AY 2026-27 or FY 2025-26
- Dividends are fully taxable at slab rates — DDT remains abolished
- Gifts from non-relatives above ₹50,000 aggregate per tax year are fully taxable
- Lottery, gambling, and TV winnings are taxed at flat 30% with zero deductions
- Family pension deduction enhanced to ₹25,000 under the new regime
- Angel tax (old Sec 56(2)(viib)) is NOT carried forward into the 2025 Act
- VDA / cryptocurrency income is taxed separately under Sec 2(111), not under Other Sources
- Interest on income tax refund is a commonly missed item — always cross-check AIS
- Schedule OS in the ITR is the disclosure location for this head
Frequently Asked Questions
What is Income from Other Sources under the Income-tax Act, 2025?
The fifth and residuary head of income under the Income-tax Act, 2025. Any income that is taxable but does not fit into Salaries, House Property, PGBP, or Capital Gains falls here. It includes interest, dividends, gifts above ₹50,000, lottery/gambling winnings, family pension, royalties in certain cases, and specific deemed incomes.
How are dividends taxed under the 2025 Act?
Fully taxable in the hands of the shareholder at applicable slab rates. DDT was abolished from tax year 2020-21 and has not been reintroduced. Companies deduct TDS at 10% on dividend payments exceeding ₹10,000 per tax year under the Sec 194 equivalent.
What is the ₹50,000 gift tax threshold?
Any sum of money or specified property received without adequate consideration from a non-relative is fully taxable if aggregate value in a tax year exceeds ₹50,000. If the aggregate crosses the threshold, the entire amount is taxable — not just the excess. Gifts from relatives, on marriage, by inheritance, and from a registered trust are exempt.
How are lottery winnings and gambling income taxed?
Flat 30% plus surcharge and cess. No basic exemption, no slab rates, no deduction. TDS at 30% under the Sec 194B/194BB/194BA equivalents.
Is family pension taxable under Income from Other Sources?
Yes. Family pension received by legal heirs of a deceased employee is taxable as Other Sources. Standard deduction of ₹25,000 or 1/3rd of pension, whichever is lower, is allowed under the new regime (up from ₹15,000 earlier).
What interest income is taxable under Other Sources?
Interest from savings accounts, FDs, RDs, post office deposits, KVP, NSCs, taxable bonds, and income tax refunds. Interest on tax-free notified bonds, Sukanya Samriddhi, and PPF are exempt.
What deductions are available against Income from Other Sources?
Expenditure incurred wholly and exclusively to earn the income, standard deduction on family pension (₹25,000 or 1/3rd), and 50% deduction on interest on enhanced compensation. No deduction is allowed against lottery/gambling winnings at 30%.
How is interest on income tax refund taxed?
Taxable as Income from Other Sources in the year of receipt at the applicable slab rate. This is a commonly missed item — always cross-check AIS before filing.
Is share premium received by a company taxable?
No. The angel tax under the old Sec 56(2)(viib) has been abolished and is NOT carried forward under the 2025 Act. Share premium received from any investor — resident or non-resident — is no longer deemed as income.
How is interest on enhanced compensation taxed?
Taxable as Other Sources in the year of receipt, irrespective of accrual. A deduction of 50% is allowed under the 2025 Act; no other deduction is permitted.
Is crypto or VDA income taxed under Other Sources?
No. VDA income is taxed under a separate standalone regime at a flat 30%, with no deduction except cost of acquisition. It has its own disclosure schedule in the ITR.
What is the TDS applicable on Other Sources income?
10% on dividends beyond ₹10,000, 10% on bank FD/RD interest beyond ₹40,000/₹50,000, 2% on non-bank interest, 30% on winnings. Form 15G/15H can be submitted to avoid TDS if total income is below taxable threshold.
How should Income from Other Sources be reported in the ITR?
Reported in Schedule OS. Pre-filled data from AIS and 26AS must be cross-checked. Failure to report is a leading trigger for scrutiny under Chapter XVI of the 2025 Act.
How can Virtual Auditor help with Other Sources tax planning?
End-to-end direct tax services including computation of Other Sources income, gift deed structuring, HUF formation, tax-efficient interest planning, and representation in assessments. Call +91 99622 60333 or email support@virtualauditor.in.
Related guides: Income-tax Act, 2025 — Complete Guide · Salary Income · House Property Income · Capital Gains Guide · Crypto & VDA Tax · TDS Rate Chart 2026-27