Tag: Income from Other Sources

Income from Other Sources under the Income-tax Act, 2025: Section 92 Gifts, Interest, Lottery Winnings and Compensation (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 07 August 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • Section 92 of the Income-tax Act, 2025 (old section 56) taxes every kind of income that does not fit another head, and lists specific items: dividend, lottery and game winnings, interest on securities, forfeited advance, employment termination compensation, insurance maturity above premiums, interest on enhanced compensation, and gifts above ₹50,000 in a year.
  • Gifts of money, land, building, shares, jewellery and other listed property above ₹50,000 are taxed unless they come from a relative, at marriage, by will or inheritance, in contemplation of death, or fall in the other exceptions of section 92(3); a property bought below stamp duty value is taxed only if the gap exceeds the higher of ₹50,000 or 10% of the price.
  • Lottery, game show, card game, gambling and race winnings are taxed at a flat 30% with no deduction (sections 194(1) and 94(4)); net online game winnings are also at 30%.
  • Interest on enhanced compensation is taxed in the year of receipt, with 50% deducted (sections 278(1) and 93(1)(f)); family pension gets the lower of one-third or ₹25,000 (₹15,000 in the old regime) (section 93(1)(d)).

“Income from other sources” is the last of the five heads of income. Under the Income-tax Act, 2025, which applies from 01/04/2026, section 92 says income of every kind that is not exempt and does not fall under salary, house property, business or profession, or capital gains is taxed here (section 92(1)). Section 92(2) then lists specific items. Section 93 allows deductions, section 94 bars some deductions, and section 95 applies the business-profits rules in section 38(1) to (4) to computations under section 92.

This replaces sections 56 to 59 of the 1961 Act. One item in the old section 56 is gone: the tax on a closely held company’s share issue above fair value (56(2)(viib), “angel tax”) does not appear in the 2025 Act’s list.

What section 92(2) lists

Item Clause Notes
Dividend (a) Taxed here; no deduction against it (section 93(2))
Winnings from lottery, crossword puzzle, races, card games, other games, gambling, betting (b) 30% flat (section 194(1))
Employees’ contributions to PF, superannuation, ESI or other welfare funds received by the employer (c) If not taxed as business income (late deposit)
Keyman insurance receipts, including bonus (d) If not taxed as business income or salary
Interest on securities (e) If not taxed as business income
Income from hiring out machinery, plant or furniture (f), (g) Also buildings if letting is inseparable
Advance received in negotiations for transfer of a capital asset, forfeited when the deal fails (h)
Interest on compensation or enhanced compensation (section 278(1)) (i) 50% deduction
Compensation on termination of employment or change in its terms (j)
Specified sum received by a unit holder from a business trust (k) Formula A less B less C
Life insurance receipts above premiums not claimed as deduction (not ULIP, not keyman) (l) If not exempt under Schedule II, Sl. No. 2
Sums or property received without or for inadequate consideration (m) Gifts, see below

Interest on savings accounts, fixed deposits, recurring deposits and bonds and rent that is not business or property income are taxed under section 92(1) or (2)(e), as before.

Gifts above ₹50,000 (section 92(2)(m))

A person who receives, from any person or persons in the tax year:

  1. Money without consideration totalling more than ₹50,000: the whole sum is taxed.
  2. Immovable property without consideration whose stamp duty value exceeds ₹50,000: the stamp duty value is taxed.
  3. Immovable property for a consideration: the stamp duty value that exceeds the consideration is taxed if that excess is more than the higher of ₹50,000 and 10% of the consideration.
  4. Other property without consideration (shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures, works of art, bullion, virtual digital assets) whose aggregate fair market value exceeds ₹50,000: the whole fair market value is taxed.
  5. Other property for a consideration that is less than its fair market value by more than ₹50,000: the excess of fair market value over the consideration is taxed.

Example. A buys a flat for ₹50,00,000. If the stamp duty value is ₹54,00,000, the excess of ₹4,00,000 is less than 10% of the price (₹5,00,000), so nothing is taxed. If the stamp duty value is ₹60,00,000, the excess of ₹10,00,000 is more than ₹5,00,000, so ₹10,00,000 is taxed as income from other sources.

If the agreement date and the registration date differ, the stamp duty value on the date of the agreement can be used, provided the consideration was paid in whole or in part by a specified banking or online mode on or before the date of the agreement (section 92(4)(a)). If the stamp duty value is disputed, the Assessing Officer can refer it to a Valuation Officer (section 92(4)(b)).

When a gift is not taxed (section 92(3))

  • From any relative (definition above and in section 92(5)(g)).
  • On the occasion of the marriage of the individual.
  • Under a will or by inheritance.
  • In contemplation of death of the payer or donor.
  • From a local authority.
  • From or by a registered non-profit organisation, except when received by a “related person” of it (section 355(h)).
  • In a transaction that is not regarded as a transfer under section 70(1) (the exact clauses of section 70(1) are listed in section 92(3)(g)).
  • From an individual by a trust created solely for the benefit of the individual’s relative.
  • From a class of persons prescribed by the Rules.

Remember clubbing: income that later arises from a gift to a spouse or a daughter-in-law is taxed in the donor’s hands (section 99), even though the gift itself is exempt as a gift from a relative.

Winnings from lotteries, games and betting

  • Tax rate: 30% flat on winnings from a lottery, crossword puzzle, race (including horse races, but not the business of owning and maintaining race horses), card game or any other game, gambling or betting (section 194(1), Table Sl. No. 1). Net winnings from an online game (computed as prescribed) are also at 30% (Table Sl. No. 5).
  • No deduction: no expenditure or allowance can be set against these winnings (section 94(4)). The exception is a race horse owner’s own business income (section 94(5)).
  • Meaning: “lottery” includes prizes by draw of lots, by chance or otherwise under any scheme; “card game and other game of any sort” includes a game show or entertainment programme on television or electronic mode where people compete to win prizes (section 92(5)(b) and (e)).
  • TDS: the payer deducts tax at the rates in force when the winnings in a single transaction exceed ₹10,000 (section 393(1), Table Sl. Nos. 1 and 3). A person who stocks, sells or distributes lottery tickets suffers 2% TDS on commission or prize above ₹20,000 (Table Sl. No. 4).
  • Computation: the 30% is charged on the winnings alone, and the tax on the rest of the income is worked out as if the winnings were not part of the total income (section 194(1)(a) and (b)).

Interest on compensation (section 92(2)(i) and 278(1))

Interest on compensation or enhanced compensation (for example, on land acquisition) is taxed in the tax year in which it is received, whatever the year to which it relates (section 278(1)). Half of it is deducted and no other deduction is allowed (section 93(1)(f)). The enhanced compensation itself is dealt with under the capital gains provisions (section 67).

Deductions allowed (section 93) and not allowed (section 94)

  • Commission or remuneration to a banker or other person for collecting interest on securities (section 93(1)(a), as substituted by Finance Act 2026, which dropped the reference to dividend).
  • For employees’ contributions: the deduction allowed for them under the business rules (section 93(1)(b)).
  • For hire of machinery, plant, furniture (and buildings): depreciation and expenses as for business (section 93(1)(c)).
  • Family pension: one-third of the pension or ₹25,000, whichever is less, where the tax is computed under section 202(1) (the new regime); one-third or ₹15,000, whichever is less, otherwise (section 93(1)(d)).
  • Interest on enhanced compensation: 50% of the income (section 93(1)(f)).
  • Commutation of pension from a specified fund, and gratuity on the death of an employee: the whole amount (section 93(1)(g) and (h)).
  • Any other expense that is not capital and is laid out wholly and exclusively for making the income (section 93(1)(e)).
  • Not allowed: personal expenses, interest payable outside India on which tax has not been paid or deducted, and salary payable outside India unless tax was paid or deducted (section 94(1)). No deduction at all is allowed against dividend income or against income from units of specified mutual funds and UTI units (section 93(2)).

How CSM & Co LLP can help

We help with gift documentation, valuation questions on property purchases, reporting winnings and compensation interest, and replies to notices about unexplained receipts. Please reach out to our team and we will be happy to assist.

Frequently asked questions

Which section of the 2025 Act replaces section 56?

Section 92 (what is taxed), section 93 (deductions), section 94 (amounts not deductible) and section 95 (profits chargeable) of the Income-tax Act, 2025.

Is a gift of more than ₹50,000 taxable?

Yes, if it is money (total above ₹50,000 in the tax year, then the whole sum), or immovable or other property given free of cost, whose stamp duty value or fair market value exceeds ₹50,000 (section 92(2)(m)). It is not taxed if it comes from a relative, on the occasion of the individual’s marriage, under a will or inheritance, in contemplation of death, from a local authority, from a registered non-profit organisation in the cases listed, in a transaction that is not a transfer under section 70(1), or from an individual to a trust for the benefit of the individual’s relative (section 92(3)).

Who is a relative for the gift rules?

For an individual: spouse; brother or sister; brother or sister of the spouse; brother or sister of either parent; any lineal ascendant or descendant; any lineal ascendant or descendant of the spouse; and the spouse of any of those persons listed from brother or sister onwards. For a HUF, any member (section 92(5)(g)).

How is lottery or game show income taxed?

At a flat 30% on the winnings (section 194(1), Table Sl. No. 1), with no deduction for expenditure or allowance (section 94(4)). A game show or an entertainment programme where people compete to win prizes counts as a card game or other game (section 92(5)(b)). TDS applies where a single payment exceeds ₹10,000 (section 393(1), Table Sl. No. 1).

Is interest on enhanced compensation taxable in the year it is awarded?

No. It is taxed in the tax year in which it is received (section 278(1)), under section 92(2)(i), after a deduction of 50% of the income (section 93(1)(f)), and no other deduction is allowed against it.

Can I deduct expenses against dividend income?

No. From 01/04/2026 section 93(2), as substituted by Finance Act 2026, allows no deduction against dividend income or income from specified mutual fund and UTI units. The earlier limit of interest expense up to 20% of the dividend no longer applies.

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Income Tax Refund: How It Is Claimed, Interest on Refund, Set-Off and Tax on the Interest (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 25 August 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • A refund is due when tax paid, including TDS, TCS and advance tax, is more than the tax properly chargeable (section 431), and it is claimed only by filing a return under section 263 (section 433).
  • The department pays simple interest at 0.5% for every month or part of a month (section 437): from 1 April of the next year if the return is filed by the due date, and from the date of filing if it is filed late.
  • No interest is paid if the refund is less than 10% of the tax determined on the return.
  • The refund is not income, but the interest on it is taxed as income from other sources.
  • The department can set the refund off against any tax still payable and may hold it for up to 60 days after a pending assessment is made.

A refund arises when you have paid, or had deducted, more tax than you owe. Chapter XX of the Income-tax Act, 2025 (sections 431 to 438) says who gets it, how it is claimed and what interest is paid. This post covers those rules for tax year 2026-27.

When a refund is due

Section 431: where the tax paid by you or on your behalf, or treated as paid by you, for a tax year exceeds the amount with which you are properly chargeable, you are entitled to a refund of the excess. The tax paid includes TDS, TCS, advance tax and self-assessment tax.

If the income of one person is included in another’s total income, only the latter can claim the refund for that income (section 432(1)). If a person cannot claim a refund because of death, incapacity, insolvency or liquidation, his legal representative, trustee, guardian or receiver can claim it for the benefit of the person or the estate (section 432(2)).

How to claim

Every claim for refund is made by furnishing a return under section 263 (section 433). A salaried person whose employer deducted more tax than needed, a person whose TDS is higher than tax, or a person who paid excess advance tax shows the excess as refund in the return. A return filed late can still claim a refund, subject to the time limits for returns (see our post on belated, revised and updated returns).

The refund is paid after the return is verified and processed. The department credits it to your bank account, so the bank details in your return must be correct. Track the status on the e-filing portal.

Interest on refund (section 437)

The department pays simple interest at 0.5% for every month or part of a month.

Refund out of Interest runs
TDS, TCS or advance tax paid in the financial year From 1 April of the year following the tax year to the date of refund, if the return was filed on or before the due date; from the date of filing the return to the date of refund, in any other case
Tax paid under section 266 (self-assessment tax) From the date of the return or of payment of tax, whichever is later, to the date of refund
Any other case (tax or penalty paid in excess of a notice of demand) From the date of excess payment to the date of refund

No interest is payable on a refund of TDS, TCS, advance tax or self-assessment tax if the refund is less than 10% of the tax determined on processing the return or on regular assessment (section 437(2)).

Example. Tax year 2026-27. Tax on your return is ₹60,000; TDS is ₹80,000, so the refund is ₹20,000, which is 33% of the tax. You file on time, and the refund is credited on 15/09/2027.

  • Interest runs from 1 April 2027 to 15 September 2027: April, May, June, July, August and part of September, which is 6 months.
  • Interest = 0.5% × 6 × ₹20,000 = ₹600.

If you file after the due date, interest runs only from the date of filing.

Is the refund taxable?

  • The refund of tax is not income. It is only a return of tax you had already paid.
  • The interest on the refund is income and is taxed under the head Income from other sources (section 92(1)), at your slab rate. Report it in the return for the year in which you receive it, as part of your interest income, and take credit for any TDS shown against it.

Example. The ₹600 interest above is added to your income. At a 30% slab with 4% cess, the tax is 600 × 30% × 1.04 = ₹187.

Set-off and withholding (section 438)

  • The department may, instead of paying the refund, set it off against any sum remaining payable by you under the 1961 Act or the 2025 Act. It must first give you written intimation of the proposed action. Reply to that intimation if you dispute the demand or have already paid it.
  • If a refund is due and an assessment or reassessment is pending, the Assessing Officer may withhold the refund, for reasons recorded in writing and with the previous approval of the Principal Commissioner or the Commissioner, up to 60 days from the date on which the assessment or reassessment is made.

Refund on appeal

If an appeal or other proceeding results in a refund, the Assessing Officer must refund it without your making a claim (section 435(1)), except in the cases in the section such as a fresh assessment being directed, where the refund becomes due only when the fresh assessment is made.

Why a refund may be late

Interest at 0.5% a month compensates for delay in paying a refund. Common reasons for delay:

  • the return is not e-verified, so it is not processed;
  • TDS shown in the return does not match the TDS statements, and the department adjusts it;
  • an outstanding demand for another year, which may be adjusted against the refund;
  • bank account details that do not match;
  • a pending assessment or scrutiny, which can hold the refund for up to 60 days after the assessment is made.

Check the intimation you receive after processing, and respond on the portal if you disagree. If a refund has been issued but not received because of a bank issue, you can ask for it to be re-issued through the portal.

Points to remember

  1. Claim a refund only by filing the return; there is no other route (section 433).
  2. File on time. A timely return earns interest from 1 April of the next year; a late one only from the date of filing.
  3. Interest on refund is taxable; the refund is not.
  4. A refund of less than 10% of the tax earns no interest.

Frequently asked questions

How do I claim an income tax refund?

File a return of income under section 263. A claim for refund can be made only by furnishing a return (section 433). If TDS, TCS or advance tax exceeds your liability, the excess is shown as refund in the return.

How much interest do I get on a refund?

Simple interest at 0.5% for every month or part of a month (section 437). For refund of TDS, TCS or advance tax, it runs from 1 April of the year after the tax year to the date of refund if you filed on time, or from the date of filing if you filed late.

When is no interest paid?

When the refund is less than 10% of the tax determined on processing the return or on regular assessment (section 437(2)), in the cases of TDS, TCS, advance tax and self-assessment tax refunds.

Is a refund taxable?

The refund of tax is not income. The interest you receive on it is taxable as income from other sources, at your slab rate (section 92).

Can the department keep my refund?

It can set off the refund against any tax still payable under the 1961 Act or the 2025 Act, after giving you written intimation (section 438(1) and (2)). If an assessment is pending it may withhold the refund for up to 60 days from the date the assessment is made, for recorded reasons and with approval (section 438(3)).

Who claims the refund of a person who has died?

The legal representative, trustee, guardian or receiver, for the benefit of the person or his estate (section 432(2)).

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

What are the 5 Heads of Income Tax?

Posted on by CA Meet Dhrangadhariya

Last updated: 17 July 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • All income is sorted into five heads: salary, house property, profits and gains of business or profession, capital gains, and income from other sources.
  • Each head has its own rules for what is taxable and which expenses and deductions are allowed.
  • Capital gains are taxed by holding period and asset type, for example 12.5% on long-term gains from most assets sold on or after 23 July 2024.
  • Correct classification decides how tax is computed and which ITR form you file.

Under the Income Tax Act, all income is sorted into five heads of income: salary, house property, profits and gains of business or profession, capital gains, and income from other sources. Each head has its own rules for what is taxable and which expenses and deductions are allowed. Putting each income under the correct head is the first step in computing tax and in choosing the right ITR form. The five heads continue under the Income-tax Act, 2025 (from 1 April 2026), although section numbers have changed. Section numbers quoted below are those of the 1961 Act.

The Five Heads of Income

  1. Income from Salary
  2. Income from House Property
  3. Profits and Gains of Business or Profession
  4. Capital Gains
  5. Income from Other Sources

1. Income from Salary

Salary is income received under a contract of employment. It includes basic pay, allowances, advance salary, bonus, commission, perquisites, gratuity, leave encashment and pension.

  • Section 15 describes what is taxable as salary.
  • Section 16 gives the deductions from salary, mainly the standard deduction.
  • Section 17 defines salary, perquisites and profits in lieu of salary.

Some allowances are exempt in the old regime, for example House Rent Allowance (HRA) for those living in rented houses. A transport allowance of up to ₹3,200 per month for certain specially-abled employees (Rule 2BB) is exempt in both regimes. The new regime allows very few other exemptions but gives a standard deduction of ₹75,000 (₹50,000 in the old regime).

2. Income from House Property

Rent from a building or land attached to it is taxed under this head. The tax is computed on the annual value of the property, less municipal taxes and the standard deduction of 30%, less interest on a home loan.

There are three kinds of property:

  1. Self-occupied property
  2. Let-out property
  3. Deemed let-out property

Up to two self-occupied houses are treated as self-occupied with nil annual value. Any other house is treated as deemed let-out. Interest on a loan for a self-occupied house is allowed up to ₹2 lakh in the old regime. Income from a house property is reported in Schedule HP of the ITR.

3. Profits and Gains of Business or Profession

Profits from any business or profession are taxed under this head after deducting the expenses allowed. It covers:

  • Profits of a trade, manufacture or service business, and professional income.
  • Income taxed under the presumptive schemes of sections 44AD, 44ADA and 44AE.
  • Profit or loss from futures and options trading and intraday trading in shares (speculative income is treated separately).
  • Salary, bonus, commission and interest received by a partner from the firm, to the extent allowed.
  • Certain incentives, licences and export benefits connected to the business.

Individuals and HUFs with business or professional income file ITR-3, or ITR-4 under the presumptive scheme.

4. Capital Gains

Profit from selling a capital asset such as property, shares, mutual funds, gold or bonds is taxed under capital gains. The gain is short-term or long-term, depending on how long the asset was held.

Asset Held for long-term if more than Short-term gain tax Long-term gain tax (sale on or after 23 July 2024)
Land and building 24 months Slab rates 12.5% without indexation
Unlisted shares 24 months Slab rates 12.5% without indexation
Listed shares and equity mutual funds 12 months 20% 12.5% on gains above ₹1.25 lakh a year
Other assets such as gold 24 months Slab rates 12.5% without indexation
Debt mutual funds bought after 1 April 2023 Not applicable Slab rates Slab rates

For land and buildings bought before 23 July 2024, resident individuals and HUFs can choose to pay 20% with indexation instead of 12.5% without it. Capital gains are reported in Schedule CG, and individuals with capital gains generally file ITR-2 or ITR-3.

5. Income from Other Sources

Anything that is taxable but does not fall under the four heads above comes here. Common examples are interest on savings accounts and fixed deposits, dividends, winnings from lotteries and games, gifts above the limit, and rent from plant, machinery or furniture when it is not business income.

Heads of Income vs Sources of Income

A source of income is where the money comes from, for example a salary, a fixed deposit, a rented flat or a business. A head of income is the tax category the Act puts that source into. Many sources can fall under one head, and each head has its own computation rules.

Conclusion

Knowing the five heads helps you report each income in the right place, claim the deductions that belong to it and file the correct ITR form. Consult a qualified professional if an income is difficult to classify.

Frequently asked questions

What are the 5 heads of income?

Income from salary, income from house property, profits and gains of business or profession, capital gains, and income from other sources.

Which head does interest income come under?

Interest on savings accounts and fixed deposits is taxed under Income from Other Sources, unless it is a business receipt.

What is the difference between a head and a source of income?

A source is where the money comes from, such as a job or a rented flat. A head is the tax category the Act puts that source into.

Do the five heads continue under the Income-tax Act, 2025?

Yes. The five heads continue from 1 April 2026, with new section numbers.

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.