Introduction
The Income Tax Law classifies taxable income into different heads for ease of computation. However, there are certain incomes that do not fall under the heads of Salary, House Property, Profits and Gains from Business or Profession (PGBP), or Capital Gains. Such incomes are taxed under the residual head "Income from Other Sources."
The Income Tax Act, 2025 has retained the concept of taxation of Income from Other Sources but has simplified and reorganized the provisions. This article provides a detailed comparison of the provisions under the Income Tax Act, 1961 and the Income Tax Act, 2025.
1. Charging Provision
The charging section establishes the taxability of residual incomes that cannot be categorized under the other main heads.
| Particulars | Income Tax Act, 1961 | Income Tax Act, 2025 |
|---|---|---|
| Charging Section | Section 56 | Section 92 |
Income Tax Act, 1961 – Section 56(1)
Income of every kind which is not chargeable to tax under any of the other four heads of income shall be chargeable under the head Income from Other Sources.
Income Tax Act, 2025 – Section 92
The provision continues on similar lines. Any income that is not taxable under any other head is taxable under the head Income from Other Sources.
Examples of incomes taxable under this head:
- Bank Interest
- Fixed Deposit Interest
- Dividend Income
- Family Pension
- Lottery Winnings
- Gambling Income
- Gifts received without consideration
- Gifts received for inadequate consideration
- Interest on Income Tax Refund
- Interest on Compensation
2. Specific Incomes Taxable under Income from Other Sources
A. Dividend Income
Income Tax Act, 1961 (Section 56(2)(i)): Dividend received from a domestic or foreign company is taxable under Income from Other Sources unless taxable as business income.
Income Tax Act, 2025 (Section 92): Dividend continues to be taxable under Income from Other Sources.
B. Interest on Securities
Income Tax Act, 1961 (Section 56(2)(id)): Interest on Government Securities, Debentures, Bonds, and other Securities is taxable under Income from Other Sources unless chargeable under Business Income.
Income Tax Act, 2025 (Section 92): Same provision continues.
C. Bank Interest
Interest received from Savings Account, Fixed Deposits, Recurring Deposits, and Corporate Deposits is taxable under Income from Other Sources.
| Act | Section |
|---|---|
| Income Tax Act, 1961 | Section 56 |
| Income Tax Act, 2025 | Section 92 |
D. Family Pension
Family pension is received by the legal heir after the death of an employee.
Taxability Details:
| Act | Section |
|---|---|
| Income Tax Act, 1961 | Section 56 |
| Income Tax Act, 2025 | Section 92 |
Deduction Rule (Section 57(iia) under 1961 Act & Section 94 under 2025 Act)
Deduction is restricted to the Lower of:
- ₹15,000
- One-third (1/3) of the Family Pension received
📝 Practical Example:
- Family Pension Received: ₹90,000
- Deduction Calculation:
- Limit 1: ₹15,000
- Limit 2: 1/3 of ₹90,000 = ₹30,000
- Allowable Deduction (Lower amount): ₹15,000
- Taxable Family Pension: ₹90,000 − ₹15,000 = ₹75,000
3. Gifts Taxation
One of the most important provisions under Income from Other Sources relates to the taxation of gifts received by individuals.
Income Tax Act, 1961 – Section 56(2)(x)
If any person receives money or property without consideration or for inadequate consideration, the value may become taxable. The threshold limit is an aggregate value exceeding ₹50,000 during the financial year.
Income Tax Act, 2025 – Section 93
The same gift taxation provisions have been retained. The taxation framework continues to apply for Money, Immovable Property, and Movable Property received without consideration or for inadequate consideration.
Gift Taxation Categories:
💵 A. Money
Without Consideration: Fully taxable if the aggregate amount received exceeds ₹50,000.
Example: Money received from a friend = ₹70,000. Since it exceeds ₹50,000, the entire ₹70,000 becomes taxable.
🏢 B. Immovable Property
Without Consideration: Taxable if the Stamp Duty Value (SDV) exceeds ₹50,000.
Example: Property gifted with SDV = ₹15,00,000. Taxable Amount = ₹15,00,000.
Inadequate Consideration: Taxable if the difference between SDV and purchase value exceeds prescribed limits.
💎 C. Movable Property
Covers property types such as shares, securities, jewellery, archaeological collections, drawings, paintings, sculptures, bullion, and virtual digital assets (VDAs). Taxable if the fair market value exceeds the threshold.
4. Gifts Exempt from Tax
Under both the 1961 Act and the 2025 Act, the following gifts are completely exempt from tax, regardless of their value:
👥 Gift from a Relative
Relative is defined as spouse, brother/sister, brother/sister of spouse, brother/sister of parents, lineal ascendant/descendant, and spouses of these individuals.
💍 Gift on Marriage
Any gift received by an individual on the occasion of their marriage is fully exempt from tax.
📜 Gift under a Will or Inheritance
Property received under a Will, succession, or inheritance is exempt from tax.
🏥 Other Exempt Transfers
Includes gifts received in contemplation of death, from local authorities, or from approved charitable trusts and institutions.
5. Interest on Compensation or Enhanced Compensation
Interest received on compulsory acquisition compensation is taxable in the year of receipt under this head.
50% Flat Deduction (Section 57(iv) of 1961 Act & Section 94 of 2025 Act)
A flat 50% deduction is allowed on the interest received. No other expenditure is allowed to be deducted from this interest income.
📝 Practical Example:
- Interest Received on Compensation: ₹2,00,000
- Less: 50% Flat Deduction: ₹1,00,000
- Taxable Income: ₹1,00,000
6. Income from Letting of Plant, Machinery and Furniture
Taxability applies to lease rentals if they are not charged under PGBP (business income):
- Letting (Section 56(2)(ii) under 1961 Act): Income from letting out machinery, plant, or furniture.
- Composite Letting (Section 56(2)(iii) under 1961 Act): Income from letting out building along with machinery, plant, or furniture, where the two lettings are inseparable.
7. Deductions Allowed
Certain expenditures incurred directly for earning income from other sources are allowed as deductions:
| Allowable Expenditures | 1961 Act | 2025 Act |
|---|---|---|
| Commission/Remuneration paid to realize dividend or securities interest | Section 57 | Section 94 |
| Family Pension Deduction (Lower of 1/3rd of pension or ₹15,000) | Section 57(iia) | Section 94 |
| Interest on Compensation (Flat 50% deduction) | Section 57(iv) | Section 94 |
| Revenue Expenditure incurred wholly and exclusively for earning such income | Section 57 | Section 94 |
8. Expenses Not Allowed
Under both Acts, certain expenditures are explicitly disallowed and cannot be claimed against Income from Other Sources:
- Personal Expenses: Any expenses of a personal nature.
- Interest Paid Outside India: Disallowed if paid without TDS compliance.
- Salary Paid Outside India: Disallowed if paid without TDS compliance.
- Wealth Tax: Specifically not deductible.
- Winnings Expenses: No expenditure/deductions are allowed for earning lottery, gambling, or betting income.
Disallowance Sections: Section 58 (Income Tax Act, 1961) vs Section 95 (Income Tax Act, 2025).
9. Lottery, Gambling and Betting Income
Special taxation rules apply to winnings from casual activities like lotteries, card games, game shows, betting, and gambling.
Flat 30% Tax Rate (Section 115BB under 1961 Act)
Winnings are taxed at a flat rate of 30%. No deductions are allowed for expenses like ticket costs, agent commissions, or travel. Furthermore, no set-off of losses from other heads of income is allowed against such winnings.
Income Tax Act, 2025: The special rate taxation framework and complete deduction disallowances continue substantially unchanged.
10. Summary of Important Sections
Compare section mappings between the old and new Acts at a glance:
Income Tax Act, 1961 Section Map
| Particulars | Section |
|---|---|
| Charging Section | 56 |
| Dividend Income | 56(2)(i) |
| Interest on Securities | 56(2)(id) |
| Gifts | 56(2)(x) |
| Interest on Compensation | 56(2)(viii) |
| Deductions | 57 |
| Family Pension Deduction | 57(iia) |
| Compensation Interest Deduction | 57(iv) |
| Disallowances | 58 |
| Lottery Income Tax Rate | 115BB |
Income Tax Act, 2025 Section Map
| Particulars | Section |
|---|---|
| Income from Other Sources (Charging & Incomes) | 92 |
| Gifts Taxation Framework | 93 |
| Allowable Deductions | 94 |
| Disallowances and Expenses Not Allowed | 95 |
| Special Rate Taxation for Lottery/Gambling | Corresponding Special Tax Provisions |
Final Conclusion
The Income Tax Act, 2025 has largely retained the taxation principles of Income from Other Sources contained in the Income Tax Act, 1961. The major change is the reorganization and simplification of provisions. The charging concept, gift taxation rules, deduction provisions, family pension benefits, taxation of interest income, and special taxation of lottery and gambling winnings remain substantially unchanged.
Taxpayers should carefully review Sections 92 to 95 of the Income Tax Act, 2025, as these sections form the backbone of taxation under the head "Income from Other Sources" in the new legislation.
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Disclaimer:
The information provided in this blog is for general awareness and educational purposes only. It does not constitute professional tax or legal advice. Readers are advised to consult a qualified Chartered Accountant or tax professional for guidance specific to their individual circumstances before making any decisions based on this text. While we make every effort to verify updates, the firm accepts no liability for errors or omissions.