The income earned from sources other than the salary is termed as income from other sources. All the incomes which are not taxed under any other category of income will fall under income from other sources and be taxed as such.
Additional earnings from the interest of savings bank accounts, fixed deposits or from a post office savings account are also taxed under income from other sources. To a certain extent, interest earned from bank savings account and post office deposits are tax-deductible. The income that is exempted from taxation also falls in this income from other sources category.
The nature in which the income is earned will determine if that income will fall beneath this head.
The income which is applicable to income from other sources are as follows:
Under Income from other Sources, the following deductions are available:
you can avail deduction on the following expenses:
Under Section 58, there are certain conditions against which deductions cannot be availed on the income from other sources:
Under Section 80TTA tax deduction of up to Rupees 10,000 is available on the interest income from bank savings account. The income from interests earned for post office deposits for individual taxpayers is exempted at an amount of up to Rupees 3,500.
Any income from fixed deposit interest will be added to other earnings you have (such as salary or professional income) upon which taxation will be imposed at a rate applicable to you.
Although you haven’t withdrawn the interest earned,Tax Deducted at Source (TDS) is made on the interest income. For example, the bank will make TDS on the interest accrued each year on the Fixed Deposit for 10 years. This is the reason why taxpayers are advised to pay their taxes annually so that there will not be a huge tax compounded when the Fixed Deposit matures.
As per the taxation law, banks must deduct taxes on the interest income when the collective amount of the deposits is more than Rupee 10,000 in a year. A rate of 10% on TDS is made if PAN details are available but if your bank doesn’t have your PAN details then 20% of TDS is made. To cross-check the digits deducted against TDS from your fixed deposit interest, you can take the help of Form 26AS.
Individuals whose total income is below the taxable limit can avoid taxation on fixed deposits by submitting Form 15G or Form 15H to their respective banks and requesting the banks not to cut any TDS. Senior citizens (60 years and older) must file Form 15H, as for everyone else Form 15G must be filed.
Keys Characteristics of Form 15G and 15H:
According to the Income Tax Act, any income which does not fall under the banner of total income will be imposed income tax under Income from other sources. The income which does not become applicable for taxation under any head automatically falls into the taxation policy of income from other sources. Income from other sources covers all income apart from salary income, house property, business/profession income and profits from the capital.