1. The Residual Income Head
Income from Other Sources under Section 56 of ITA 2025 captures all income not covered by the four specific heads — Salary, House Property, Business/Profession, or Capital Gains. It is the catch-all head. Most individual taxpayers earn significant Other Sources income — primarily interest from FDs, savings accounts, and bonds — yet many fail to correctly report it in ITR.
2. Common Items Under Other Sources
- Bank FD and RD interest (all banks — aggregate, not per bank)
- Post office savings account interest, time deposit interest, MIS
- NSC interest (accruing annually)
- Dividends from Indian and foreign companies
- Gifts from non-relatives exceeding Rs 50,000 in aggregate
- Family pension (heir receives deceased employee pension)
- Subletting income (tenant sublets — not house property income)
- RBI bond interest, corporate bond interest
- P2P lending interest
3. Bank Interest: Taxable at Slab
All bank interest — FD, RD, savings, NRO — is taxable at the investor slab rate as Other Sources. TDS at 10% is deducted by the bank when annual interest from that bank exceeds Rs 40,000 (Rs 50,000 for senior citizens). The TDS is a credit — not the final tax. If total income is in 20% or 30% bracket, additional tax beyond 10% TDS is due in ITR. Submit Form 15G (non-senior, income below taxable limit) or Form 15H (senior citizen) to avoid TDS.
4. Interest Deductions (Old Regime)
| Type | Deduction | Section |
|---|---|---|
| Savings bank interest (resident below 60) | Up to Rs 10,000 per year | Section 80TTA equivalent |
| ALL interest (senior citizen 60+) | Up to Rs 50,000 per year | Section 80TTB equivalent |
5. Gifts: Rs 50,000 Threshold
Cash or property gifts from non-relatives are taxable as Other Sources if aggregate exceeds Rs 50,000 in a Tax Year. If the threshold is crossed, the entire amount (not just excess) is taxable. Gifts from relatives (spouse, parents, siblings, children, grandparents) are always exempt. Gifts on marriage (from anyone), through will, or from charitable institutions are also exempt.
6. Family Pension Deduction
Family pension received by the heir of a deceased employee is taxable as Other Sources. A deduction of Rs 15,000 or 1/3 of family pension received — whichever is lower — is allowed. This is a standard deduction (no expense proof needed). The balance is added to total income and taxed at slab rates.
7. NSC Interest: Accrual Basis
National Savings Certificate (NSC) interest accrues annually but is paid only at maturity. For income tax purposes, NSC interest is taxable on an accrual basis each year. In years 1-5, the accrued interest is deemed reinvested and eligible for Section 123 deduction (within Rs 1.5L). In the final year (maturity), the interest is taxable without a corresponding Section 123 deduction.
8. Why TaxClue
AIS captures all bank interest across all accounts. Underreporting Other Sources income is one of the most common triggers for scrutiny notices. TaxClue reconciles AIS interest data and ensures complete reporting. Contact us under ITA 2025.