Taxing Income from Other Sources Under Sections 56 and 92

"Income from Other Sources" is the catch-all head of income in Indian tax law. If you earned interest on a fixed deposit, received a dividend from shares, got a cash gift from a non-relative, or collected family pension after a family member's passing, you are likely reporting at least part of your income under this head. It is also the head where many taxpayers make reporting errors, either by omitting items they assumed were exempt or by missing deductions they were entitled to claim.

This guide covers every income type that falls under this head, the deductions available, the TDS provisions that apply, and how to report each item correctly in your ITR for AY 2026-27.

What Falls Under "Income from Other Sources"?

The Income Tax Act defines this head by exclusion. If an income is not chargeable under Salary (head 1), Income from House Property (head 2), Profits and Gains of Business or Profession (head 3), or Capital Gains (head 4), it falls under Income from Other Sources (head 5).

This means the scope is broad. The commonly encountered items include:

• Interest on savings accounts, FDs, RDs, bonds, and loans given
• Dividends from shares and mutual funds
• Family pension
• Gifts above the Rs 50,000 limit from non-relatives
• Winnings from lotteries, crossword puzzles, betting, and online games
• Interest on income tax refund

Interest Income: FD, Savings, Bonds, and Loans Given

Interest income is by far the most common item under this head. It includes interest on fixed deposits, recurring deposits, savings accounts, post office schemes, bonds, debentures, and even loans given to friends or relatives.

Fixed Deposit and Recurring Deposit Interest

From 1 April 2025, banks deduct TDS at 10% under Section 194A when FD/RD interest exceeds Rs 50,000 in a financial year (Rs 1,00,000 for resident senior citizens aged 60 and above). Under the new Income Tax Act 2025, the corresponding TDS provision falls under Section 393.

A critical point many taxpayers miss: FD interest is taxable on accrual basis, not on payment basis. If you hold a 5-year cumulative FD, you must report the interest accrued each year in your ITR, not just in the year the FD matures and pays out. Your bank issues a TDS certificate reflecting annual accrued interest for this reason.

Savings Account Interest

Savings account interest is fully taxable. However, under the old tax regime, you can claim a deduction:

• Section 80TTA: Up to Rs 10,000 deduction on savings account interest for individuals below 60 years. This applies only to savings accounts, not FDs or RDs.
• Section 80TTB: Up to Rs 50,000 deduction on all interest income (savings, FD, RD, post office deposits) for senior citizens aged 60 and above.

Under the new tax regime (default from FY 2023-24), neither 80TTA nor 80TTB is available. All interest income is fully taxable at slab rates with no deduction.

Tax Rate Chart

Interest Income Deductions: Old vs New Regime

80TTA and 80TTB apply only under the old tax regime

Savings interest (below 60, old regime)

Section 80TTA. Only savings account, not FD/RD.

Rs. 10,000 exempt

All interest (60+, old regime)

Section 80TTB. Covers FD, RD, savings, post office.

Rs. 50,000 exempt

Savings interest (new regime)

No 80TTA deduction available under default new regime.

Fully taxable

FD/RD interest (new regime)

No 80TTB deduction available under default new regime.

Fully taxable

Source: Income Tax Act 1961, Sections 80TTA, 80TTB; Finance Act 2023

Interest on Bonds, Debentures, and Loans Given

Interest earned on corporate bonds, debentures, government securities (beyond exempt categories), and personal loans given to others is taxable under this head. No special deduction applies. If the borrower has not deducted TDS (common with personal loans), you must self-report the full amount.

Dividend Income

Since the abolition of the Dividend Distribution Tax (DDT) from AY 2021-22, dividends received from domestic companies and mutual funds are taxable in the hands of the shareholder at their applicable slab rate.

TDS is deducted at 10% under Section 194 when dividend to an individual exceeds Rs 10,000 in a financial year (raised from Rs 5,000 from 1 April 2025). Under the new Act, this falls within Section 393.

Deduction available: If you took a loan specifically to purchase the shares generating dividends, the interest on that loan is deductible under Section 57(i). The deduction is capped at 20% of dividend income.

Report dividends in Schedule OS of your ITR. If you hold shares in multiple companies, aggregate all dividend income into a single figure for the schedule. The individual company-wise breakup is visible in your AIS.

Family Pension

Family pension is the pension received by the legal heir (usually spouse or children) of a deceased government or private sector employee. It is taxable under "Income from Other Sources," not under "Salary." This is a distinction many taxpayers get wrong.

Deduction under Section 57(iia): One-third of the pension received, capped at Rs 15,000 under the old regime and Rs 25,000 under the new regime (from FY 2024-25). The Rs 75,000 / Rs 50,000 salary standard deduction does not apply to family pension.

Report family pension in the designated row within Schedule OS. The deduction is auto-calculated in most ITR utility software.

Taxability of Gifts: Section 56(2)(x) and New Section 92

Gift taxation is one of the most complex areas under this head. Under the 1961 Act, Section 56(2)(x) governs the taxability of gifts. Under the Income Tax Act 2025 (effective April 1, 2026), Section 92 replaces Section 56 as a whole, including the gift provisions. The substantive rules, including the Rs 50,000 threshold, the definition of "relative," and the exemption categories, remain unchanged.

When Are Gifts Taxable?

A gift is taxable if all three conditions are met:

1. You received money, immovable property, or specified movable property
2. It was received without consideration (free) or for inadequate consideration
3. It does not fall under any of the specified exemptions

The Rs 50,000 Threshold

If the aggregate value of gifts received from non-relatives during a financial year exceeds Rs 50,000, the entire amount is taxable (not just the excess over Rs 50,000). This is an important distinction. If you receive Rs 51,000 in aggregate gifts from non-relatives, the full Rs 51,000 is taxable, not just Rs 1,000.

For immovable property received without consideration: if the stamp duty value exceeds Rs 50,000, the full stamp duty value is taxable. For immovable property received for inadequate consideration: if the stamp duty value exceeds the consideration by more than the higher of Rs 50,000 and 10% of the consideration, that difference is taxable.

Exempt Gifts (Not Taxable)

Gifts received from the following sources are fully exempt regardless of amount:

1. Relatives: Spouse, brother, sister, brother or sister of spouse, brother or sister of either parent, any lineal ascendant or descendant of the individual or of the spouse, and the spouse of any of these persons
2. On the occasion of marriage of the individual
3. Under a will or by inheritance
4. In contemplation of death of the donor
5. From a local authority or a fund, university, hospital or institution referred to in Section 10(23C)
6. From any trust or institution registered under Section 12A/12AA/12AB

Worked Example: Gift Taxation

Situation: During FY 2025-26, you received Rs 30,000 from your uncle (father's brother, a "relative"), Rs 40,000 from a family friend (non-relative), and Rs 25,000 from a colleague (non-relative).

• Gift from uncle: Rs 30,000, exempt (uncle is a relative under the definition)
• Total from non-relatives: Rs 40,000 + Rs 25,000 = Rs 65,000
• Since aggregate non-relative gifts exceed Rs 50,000, the entire Rs 65,000 is taxable under "Income from Other Sources"

Lottery, Gambling, Betting, and Online Gaming

Tax Rate Chart

Flat-Rate Income Under Other Sources

No slab benefit, no deductions allowed (except cost of acquisition for VDA)

Lottery / Crossword Puzzles

Section 115BB. Plus surcharge and 4% cess.

30%

Gambling / Betting / Horse Racing

Section 115BB. No expense deduction permitted.

30%

Online Gaming Winnings

Section 115BBJ. TDS under Section 194BA.

30%

Virtual Digital Assets (Crypto)

Section 115BBH. Only cost of acquisition deductible.

30%

Source: Income Tax Act 1961, Sections 115BB, 115BBJ, 115BBH; Finance Acts 2022 and 2023

These income categories are taxed at a flat 30% (plus applicable surcharge and 4% health and education cess), regardless of your total income or tax slab. No deductions or set-off of losses are permitted against this income.

TDS provisions:

• Lottery and crossword: TDS at 30% under Section 194B when a single winning exceeds Rs 10,000 (single-transaction test from 1 April 2025)
• Online gaming: TDS at 30% under Section 194BA on net winnings
• Horse racing: TDS at 30% under Section 194BB when a single winning exceeds Rs 10,000

Virtual Digital Assets (Cryptocurrency and NFTs)

Income from the transfer of virtual digital assets (VDA), including cryptocurrency and NFTs, is taxed at a flat 30% under Section 115BBH. The only deduction allowed is the cost of acquisition. No deduction for mining costs, transaction fees, or any other expense is permitted. Losses from VDA cannot be set off against any other income or carried forward, and losses from other income cannot be set off against VDA gains.

TDS at 1% under Section 194S applies on VDA transfers once the year's payments exceed Rs 50,000 where the payer is a specified person (broadly, an individual or HUF without business turnover above Rs 1 crore or professional receipts above Rs 50 lakh), or Rs 10,000 for other payers.

Deductions Available Under Section 57

The deductions permitted against income from other sources are narrow compared to other income heads:

Not deductible under Section 57:

• Capital expenditure of any kind
• Personal expenses
• Any expenditure against lottery, gambling, betting, or VDA income (Section 58)

TDS Provisions: What Gets Deducted at Source

Understanding the TDS landscape for this head helps with cash-flow planning and ITR reconciliation.

If the tax on your estimated total income is nil (and, for Form 15G, the income covered by the declaration is within the basic exemption limit), you can submit Form 15G (below 60) or Form 15H (60 and above) to prevent TDS on FD interest and certain other payments. This must be submitted at the start of each financial year to each bank or payer. From 1 April 2026 (tax year 2026-27), both are replaced by Form 121 under the Income-tax Act, 2025.

How to Report in ITR: Schedule OS

Income from Other Sources is reported in Schedule OS across ITR 1, ITR 2, ITR 3, and ITR 4. The schedule has specific rows for each income type.

Which ITR Form?

• ITR 1 (Sahaj): If you are resident, your total income is up to Rs 50 lakh, and you have salary or pension, up to two house properties, and income from other sources (no business income, and no capital gains other than Section 112A LTCG up to Rs 1.25 lakh). Most salaried taxpayers with FD interest and dividends file ITR 1.
• ITR 2: If you have capital gains in addition to other sources, or income exceeds Rs 50 lakh.
• ITR 3: If you have business or professional income alongside other sources.
• ITR 4 (Sugam): If you are under presumptive taxation and also have income from other sources.

Transition: IT Act 1961 to IT Act 2025

The Income Tax Act 2025 came into effect on April 1, 2026. For income from other sources, the key transition points are:

The substantive rules remain the same. The Rs 50,000 threshold, the definition of relatives, the exemption list, and the deductions under Section 57 are all carried forward. What changes is the section numbering. For AY 2026-27 (income earned in FY 2025-26), you file under the 1961 Act provisions. For the subsequent tax year (income from April 1, 2026), the 2025 Act applies.

Common Mistakes to Avoid

1. Not reporting FD interest below the TDS threshold. If your bank did not deduct TDS because FD interest was below Rs 50,000 (Rs 1,00,000 for senior citizens), the interest is still taxable and appears in your AIS. Omitting it triggers a mismatch notice under Section 143(1)(a).

2. Reporting family pension under "Salary." Family pension is not salary. It must be reported under "Income from Other Sources" in Schedule OS, with the Section 57(iia) deduction applied separately.

3. Claiming 80TTA or 80TTB under the new tax regime. These deductions are available only under the old regime. If you are on the default new regime, all savings and FD interest is fully taxable.

4. Treating all gifts as exempt. Only gifts from specified relatives, on marriage, under will, or in contemplation of death are exempt. Cash or property received from friends, colleagues, or distant relatives who do not fall within the statutory "relative" definition is taxable if the aggregate exceeds Rs 50,000.

5. Ignoring accrued FD interest. Cumulative FDs accrue interest every year even if payout happens at maturity. Report accrued interest annually, not in the lump-sum maturity year.

6. Claiming deductions against lottery or VDA income. No deduction (other than cost of acquisition for VDA) is allowed against income taxed at 30% flat rate under Sections 115BB and 115BBH.

7. Missing the 20% cap on interest deduction for dividends. If you borrowed to invest in shares, the interest on that loan is deductible against dividend income, but only up to 20% of the dividend received.

Tax Garden Can Help

Whether you have FD interest from five banks, dividend income from a demat account, family pension, or a complex gift situation, Tax Garden's filing team ensures every item is correctly classified and reported in the appropriate ITR schedule. Our income tax filing service includes AIS reconciliation, regime comparison, and Schedule OS review. Reach out through our support page to get started.

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Sources and verification: This article is based on Sections 56 to 59 of the Income Tax Act 1961, Section 92 of the Income Tax Act 2025, Sections 80TTA and 80TTB, Sections 115BB, 115BBJ and 115BBH, TDS provisions under Sections 194, 194A, 194B, 194BA, 194BB, and 194S, and ITR form instructions published by the Income Tax Department at incometax.gov.in. Dividend taxation changes reflect the Finance Act 2020 (DDT abolition). VDA provisions reflect the Finance Act 2022. The 80TTA/80TTB restriction under the new regime is per the Finance Act 2023. Sections 92 to 95 of the IT Act 2025 replacing Sections 56 to 59 are per the published text of the Income Tax Act 2025 on incometax.gov.in.

Frequently Asked Questions

When does a bank deduct TDS on FD interest for FY 2025-26?

From 1 April 2025, banks deduct TDS under Section 194A only when interest paid or credited to you in a financial year exceeds Rs 50,000, or Rs 1 lakh for resident senior citizens. The rate is 10%, or 20% if PAN is not furnished. Interest below these limits is still fully taxable and appears in your AIS, so report it in Schedule OS.

Is dividend income taxable and when is TDS deducted?

Yes. Dividends from Indian companies and mutual funds are taxed in your hands at slab rates. For FY 2025-26, the company deducts TDS at 10% under Section 194 only if dividends paid to you in the year exceed Rs 10,000. The only deduction allowed is interest on money borrowed to buy the shares, limited to 20% of the dividend income.

How much deduction is allowed on family pension?

Family pension is taxed under Income from Other Sources, not salary. Under Section 57(iia), you can deduct one-third of the family pension subject to a ceiling: Rs 15,000 under the old regime and Rs 25,000 under the new regime for AY 2026-27. The standard deduction for salary and pension does not apply to family pension.

I received Rs 65,000 from friends as gifts. Is it taxable?

Yes, the whole Rs 65,000. Under Section 56(2)(x), if the total of money received without consideration from non-relatives in a year exceeds Rs 50,000, the entire amount is taxable, not just the excess. Gifts from relatives as defined in the Act, gifts received on your marriage, and amounts received under a will or inheritance are exempt regardless of value.

Can a young person submit Form 15G to stop TDS on FD interest?

Form 15G can be given by a resident individual below 60 whose tax on total income for the year is nil, and whose interest and similar income does not exceed the basic exemption limit. Senior citizens use Form 15H, which only needs the final tax on total income to be nil. Submit it to each bank at the start of the year, before interest is credited.