Income From Other Sources: What they are

Income from Other Sources refers to earnings not taxable under other income categories but are still subject to tax. Learn about sections 56, 57, and 58.
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Income From Other Sources
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4 min
08-May-2025

Not all your income fits into neat categories like salary or business profits. Some earnings—like a lottery win or interest on fixed deposits—fall under a different bucket called Income from Other Sources, as defined in Section 56 of the Income Tax Act.

This category is crucial. Why? Because forgetting to disclose these earnings can lead to penalties, and reporting them correctly can even help you plan your taxes better.

Let’s break it down, simply.

What qualifies as ‘Income from Other Sources’?

This head acts as a catch-all for any income that doesn’t fall under the other four heads: Salary, House Property, Capital Gains, or Business & Profession. Here are some common examples:

  • Interest income from savings accounts, recurring deposits, and fixed deposits
  • Dividends from shares or mutual funds
  • Lottery or prize winnings
  • Gifts received without any consideration
  • Rental income from furniture or machinery
  • Family pension, insurance commission, and more

These may seem minor on their own—but together, they can significantly affect your tax liability.

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Section 56: Incomes that are only taxable under ‘Other Sources’

Here’s a list of what falls strictly under this category, as per Section 56:

  1. Dividends: Taxable in the hands of the recipient if they exceed Rs. 5,000
  2. Lottery or prize money: Flat 30% tax, with no deductions allowed
  3. Gifts above Rs. 50,000: If received from non-relatives, they're taxable
  4. Interest on enhanced compensation
  5. Advance forfeited: On capital asset deals
  6. Income from sub-letting a rented house
  7. Family pension: Taxable with a standard deduction
  8. Letting of plant, machinery, furniture (not part of business income)
  9. Unexplained cash credits or investments
  10. Any other income that doesn’t fit elsewhere

Misclassifying such incomes could attract notices from the IT department. Always verify whether the income should be listed under this head.

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Section 57: Deductions allowed under ‘Other Sources’

The Income Tax Act doesn’t just ask you to declare your income—it also lets you claim certain deductions. Here is what you can reduce from your taxable income under this head:

  1. Commission or fees paid to earn interest or dividends
  2. Repairs or insurance on rented furniture or equipment
  3. Depreciation on such rented assets
  4. Standard deduction for family pension: Rs. 15,000 or 1/3rd of the pension, whichever is lower
  5. Other necessary expenses directly related to earning that income

But remember: the keyword here is “directly related.” Personal or unrelated expenses can’t be claimed here.

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Section 58: Expenses you cannot deduct

Just like there are allowed deductions, there are also disallowed ones under Section 58. These include:

  1. Personal expenses of any kind
  2. Interest payable outside India, if TDS isn’t paid
  3. Wealth tax payments
  4. Expenses related to tax-free income, like exempt mutual fund dividends
  5. Expenses tied to TDS default, where the tax wasn’t deposited with the government

Claiming such deductions can lead to scrutiny, back taxes, and even penalties. That’s why it’s best to stay on the right side of compliance—and consult a tax advisor when unsure.

Why this category matters for smart tax planning

Ignoring income from other sources may feel harmless—after all, it is “just” bank interest or a one-time prize. But in reality, it:

  1. Impacts your total taxable income
  2. Can trigger penalties if left unreported
  3. Offers deductions that many miss out on
  4. Helps you make informed decisions about where to invest or save

Pro tip:
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In summary

Income from Other Sources ensures that all forms of income are taxed fairly—even those that don’t fall under your job or business. Sections 56, 57, and 58 together define:

  • What’s taxable
  • What deductions you can claim
  • What expenses are not allowed

Being aware of this category can help you stay compliant and save on taxes. With the right planning—and possibly the right investment tools—you can turn these miscellaneous incomes into meaningful financial growth.

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