Income from Other Sources - Sections 92 to 95 | Dividends, Interest, Gifts & More

Key Takeaways

• Section 92 of the Income Tax Act, 2025 (previously Section 56) is the residual head that taxes income not classifiable under the other four heads (Salaries, House Property, Business/Profession, Capital Gains).
• Dividends are fully taxable in the hands of shareholders at slab rates since Tax Year 2020-21.
• Gifts exceeding Rs. 50,000 (aggregate in a year) from non-relatives are taxable under Section 92(2)(x) (previously Section 56(2)(x)).
• Interest on savings accounts, FDs, and recurring deposits falls under this head (unless from business).
• Section 93 (previously Section 57) allows limited deductions; Section 94 (previously Section 58) lists specific disallowances. Section 59 is merged into Sections 92-94.

Incomes Specifically Taxable under Section 92(2) of the Income Tax Act, 2025

Dividends - Section 92(2)(i)

From Tax Year 2020-21, dividends are taxable in the hands of shareholders. Key points:

• Domestic company dividends are taxed at slab rates (no DDT)
• Deduction under Section 93: Interest expenditure incurred to earn dividend income is allowed, limited to 20% of gross dividend income
• TDS at 10% under Section 393 (previously Section 194) on dividend exceeding Rs. 5,000
• Interim and final dividends are both taxable

Interest Income

Interest from the following sources is taxable:

• Savings bank accounts
• Fixed deposits and recurring deposits
• Post office deposits (except certain exempt categories)
• Loans given to others
• Income tax refund (taxable under this head)
• Interest on securities (government or corporate bonds)

Gifts - Section 92(2)(x) of the Income Tax Act, 2025 (previously Section 56(2)(x))

Gifts received by any person (individual or HUF) are taxable if:

| Nature of Gift | Taxable If | |---------------|-----------| | Money (cash, cheque, etc.) | Aggregate exceeds Rs. 50,000 in a year | | Immovable property (without consideration) | Stamp duty value exceeds Rs. 50,000 | | Immovable property (inadequate consideration) | Stamp duty value exceeds consideration by more than Rs. 50,000 AND the difference exceeds 10% of consideration | | Movable property (without consideration) | FMV exceeds Rs. 50,000 | | Movable property (inadequate consideration) | FMV exceeds consideration by more than Rs. 50,000 |

Exempt gifts (not taxable):

• From any relative (spouse, brother, sister, lineal ascendant/descendant and their spouses)
• On the occasion of marriage of the recipient
• Under a will or inheritance
• In contemplation of death of the payer
• From any local authority, fund, foundation, university, hospital referred to in specified sections
• From any trust or institution registered under the Income Tax Act, 2025 (previously Section 12A/12AA/12AB, now Section 332 of the Income Tax Act, 2025)

Family Pension - Section 92(2)(ii) of the Income Tax Act, 2025 (previously Section 56(2)(ii))

Pension received by a family member of a deceased employee from the employer is taxable as "Income from Other Sources." A deduction of one-third of pension or Rs. 15,000, whichever is less, is available under Section 93 (previously Section 57(iia)).

Winnings - Section 92(2)(ib)

Income from lotteries, crossword puzzles, races (including horse races), card games, gambling, betting, game shows, and online gaming is taxable at a flat rate of 30% (plus surcharge and cess). No deduction for any expenditure is allowed.

Deductions under Section 93 of the Income Tax Act, 2025 (previously Section 57)

| Deduction | Applicable To | |-----------|--------------| | Commission/remuneration to banker or agent for realising dividend or interest | Dividend and interest income | | Interest on loan taken to invest in shares/securities | Limited to 20% of gross dividend income | | Family pension deduction | 1/3rd of pension or Rs. 15,000, whichever is less | | Any other expenditure (not being capital) | Laid out wholly and exclusively to earn such income |

Disallowances under Section 94 of the Income Tax Act, 2025 (previously Section 58)

• No deduction for personal expenses
• No deduction under Sections 28 to 34 of the Income Tax Act, 2025 (previously Sections 30 to 37 - these apply only to business income)
• No deduction for interest or salary payable outside India on which TDS has not been deducted
• Wealth tax (now abolished) was not allowed as deduction

Landmark Judgement

Worked Example

Mr. Karan (age 40, resident) has the following "other source" income in Tax Year 2025-26:

| Particulars | Amount (Rs.) | |------------|-------------| | Dividend from listed Indian companies | 3,50,000 | | Interest on savings account (SBI) | 18,000 | | Interest on FD (HDFC Bank) | 1,25,000 | | Gift from friend on birthday (cash) | 75,000 | | Gift from maternal uncle (cash) | 1,00,000 | | Family pension from father's employer | 3,00,000 | | Interest paid on loan taken to buy shares | 1,20,000 |

Computation of Income from Other Sources:

| Income | Amount (Rs.) | Notes | |--------|-------------|-------| | Dividend income | 3,50,000 | Fully taxable | | Less: Interest on loan for shares (limited to 20% of dividend) | (70,000) | 20% of 3,50,000 | | Net dividend income | 2,80,000 | | | Savings account interest | 18,000 | Section 153 deduction available separately | | FD interest | 1,25,000 | Fully taxable | | Gift from friend | 75,000 | Taxable (exceeds Rs. 50,000, non-relative) | | Gift from maternal uncle | NIL | Exempt (brother of mother = relative) | | Family pension | 3,00,000 | | | Less: Deduction u/s 93 | (15,000) | Lower of 1/3rd (1,00,000) and Rs. 15,000 | | Net family pension | 2,85,000 | | | Total Income from Other Sources | 7,83,000 |

Separately, Mr. Karan can claim deduction of Rs. 10,000 under Section 153 (previously Section 80TTA) for savings account interest.

Expert Tip

Section Interconnect

• Also read: Chapter 9 - Deductions under Chapter VIII (Sections 122 to 154) (Section 153 deductions reduce tax on interest income)
• Also read: Chapter 8 - Set Off and Carry Forward of Losses (losses from other sources can be set off against income from other sources, except speculative/gambling losses)
• Also read: Chapter 10 - TDS, TCS & Advance Tax (TDS on interest under Section 393, TDS on dividend under Section 393)

Frequently Asked Questions

Q1: Is interest earned on PPF account taxable under income from other sources?

No. Interest earned on PPF is exempt under Schedule II (Sl. No. 3 - Provident Fund payment) of the Income Tax Act, 2025 (previously Section 10(11)). PPF enjoys EEE status. However, interest on most other deposits (savings accounts, FDs, RDs, NSC) is taxable under this head. Even the accrued interest on NSC (except the final year) should be offered to tax annually.

Q2: Are birthday or anniversary gifts from friends taxable?

Yes. Only gifts received on the occasion of marriage of the individual are exempt (from anyone, without limit). Birthday and anniversary gifts from non-relatives are taxable under Section 92(2)(x) of the Income Tax Act, 2025 if the aggregate of all such gifts exceeds Rs. 50,000 in a financial year. If the total crosses Rs. 50,000, the entire amount (not just the excess) becomes taxable.

Q3: How is income from online gaming or fantasy sports taxed?

Income from online gaming (including fantasy sports) is taxed at a flat rate of 30% (plus surcharge and cess) under the relevant provision of the Income Tax Act, 2025 (previously Section 115BBJ). TDS is deducted at 30% under Section 393 (previously Section 194BA) on net winnings at the time of withdrawal or at the end of the financial year. No deduction for any expenditure or loss is allowed against such winnings.

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