INCOME FROM OTHER SOURCES

Income from Other Sources

Definition: Income that is not exempt from tax and is not chargeable to tax under other heads of income, such as Salaries, Income from House Property, Profits and Gains from business or profession, and Capital gains.
Details: Includes income from dividend, interest on securities, winning from lotteries, online games, and other sources.

Dividend Income: Distribution of profits by a company to its shareholders, including deemed dividend as defined in Section 2(22) of the Income Tax Act.
Interest on Securities: Income from securities, such as bonds, debentures, and government securities, taxable under the head 'Income from other sources' if not chargeable to tax under the head 'Profits and gains of business or profession'.
Gift of Securities: Receipt of movable property, including shares and securities, without consideration or for inadequate consideration, taxable in the hands of the recipient as income from other sources.

Scheme of Taxation: Prior to Assessment Year 2021-22, domestic companies and mutual funds paid Dividend Distribution Tax (DDT) on dividend, exempting shareholders from tax. Post-2021-22, dividend income is taxable in the hands of shareholders under the head 'Income from other sources'.
Tax Rate: Dividend income is taxable at the applicable slab rate of the shareholder, subject to residential status and quantum of income.

Basis of Charge: Computed in accordance with the method of accounting regularly employed by the assessee, either mercantile or cash system.
Taxable Income: Gross interest from securities less permissible deductions, such as collection charges, interest on borrowings, and revenue expenditure.

Taxability: Receipt of shares and securities without consideration or for inadequate consideration is taxable in the hands of the recipient as income from other sources, if the aggregate fair market value exceeds Rs. 50,000.
Computation of Fair Market Value: As per Rule 11UA of the Income Tax Rules, 1962, different methods are prescribed for computing the fair market value of quoted and unquoted shares and securities.

Exemptions: Certain interest incomes are exempt from tax under Section 10 of the Income Tax Act.
Exceptions: No tax is charged if the aggregate amount of difference between the fair market value of properties received and consideration paid does not exceed Rs. 50,000, or if the receipt is from a specified relative, local authority, or trust/institution.