In Income Tax Return (ITR) forms, the income to be declared is broadly classified under five heads: salary, business, house property, capital gain or loss and income from other sources (IFoS). Any residual income which is taxable but cannot be declared under the first four categories has to be declared under IFoS. Tax benefits are available on certain incomes, such as savings account interest, family pension, etc., under the head IFoS. After claiming tax exemptions and deductions, the income under the head IFOS is added to the total income of the taxpayer and taxed as per the slab rates.
Mint tells you about IFoS and the tax deduction rules applicable to them.
Interest Income: Interest earned on deposits, savings accounts and bonds is shown under the head IFoS.
interest income . So far 10,000 in a financial year from bank or post office savings accounts is exempt from tax. This exemption limit is applicable on the combined interest of all savings accounts and not individual accounts. So, if you have accounts with different banks and post office, you need to add up the interest income earned from all the accounts to calculate your tax liability. If the aggregate interest falls below the threshold, you should declare it under exempt income, otherwise it should be declared under the head IFoS.
The interest earned from fixed deposits and recurring deposits is fully taxable.
Dividend: The rules on the taxability of dividend income have changed from the current assessment year. Previously, dividend income . So far 10 lakh was exempted from tax as the company was paying Dividend Deducted Dividend Distribution Tax (DDT). up dividend 10 lakh was to be declared by the taxpayer and was taxed at 10%.
From this year onwards, the responsibility of declaring dividend and paying tax on it lies entirely on the taxpayer. Given this, the threshold of 10 lakh is removed and every taxpayer has to declare dividend income under the head IFOS and pay tax on the same as per his slab rate.
Gifts: Gifts received in a year whose total value exceeds 50,000 is treated as other income and declared under IFOS as per section 56(2). It should be noted that if the total value of gifts exceeds the exemption limit 50,000, you will have to pay tax on the entire amount. Gifts received from other people by way of inheritance, on the occasion of marriage, from siblings of parents, from spouse, are not taxable and should be declared under exempted income.
Any item or cash is considered as a gift when the recipient receives it without giving any monetary service in return.
The ITR form does not just reveal the total amount but also gives a detailed disclosure of the gifts. In the case of movable property, such as shares, jewellery, artefacts, etc., the fair market value (FMV) of the commodity is disclosed in the tax return. For immovable property, stamp duty is considered.
Non-recurring income: Income from gambling, lotteries, horse racing, crossword puzzles, betting and other card games is taxed under IFOS. No tax exemption is available for income from these activities. Interest earned on additional tax paid to the government is also taxed under IFOS.
Family Pension: If you are the legal heir of the deceased person earning pension, you have to declare the pension received as other income. IT laws allow deduction on family pension. less than one third of the total pension or 15,000 can be claimed as tax deduction and balance amount is declared as income under IFOS head and taxed at slab rates. Further, any commuted pension, which refers to pension received from time to time, from an authorized fund to which the taxpayer has contributed, is also taxed under IFoS.
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