Taxpayers usually take into consideration only the income from their main occupation while filing their income tax returns (ITR). However, it is also important to factor in the income from "other sources", and select the appropriate form to file the ITR. If you don't include income from other sources in the ITR, the income tax department may consider it a case of tax evasion. The I-T Department may also send you a notice seeking an explanation for not including the other income.
So, let's find out what all is considered to be "income from other sources" that must be reported while filing ITRs.
Incomes that form part of tax returns
The I-T department categorises different kinds of income including income from salary, housing property, capital gain/loss, business and profession, and income from other sources. Any income which can't be included under income from any of the income heads is taken into account under the "income from other sources" category. So, let's find out some of the common incomes that fall under this category:
Interest on a savings account
The income earned as interest from savings accounts is not fully taxable. The I-T Act allows a deduction under Section 80TTA up to Rs 10,000 on interest from savings accounts. However, even if you have not crossed the threshold of Rs 10,000 you should show the income while filing the ITR. In ITR-1 there is a space to report the exempt income-you can disclose interest from a savings account in that section.
Income earned from dividend up to Rs 10 lakh in a financial year is exempt under Section 10(35). Some people make a mistake by not reporting it due to which they get a query from the I-T Department later. The dividend income can be shown in Part-D of the ITR 1 form under the "exempt income" head.
Tax refund along with interest on it
If you have received a tax refund along with interest during the relevant financial year, you must report it while filing the ITR. The tax refund is not taxable, but the interest earned on such refund (if any) needs to be included as taxable income. You can check the tax refund amount in Form 26 AS.
The pension amount received by the dependent of a government employee is known as family pension. It is considered as the income from other sources in the hand of the receiver. If the taxpayer has received family pension, she must include it while filing the ITR.
Many people work in cities and also earn agricultural income from their native places. If the agricultural income is less than Rs 5,000, you can file the ITR 1. However, if it exceeds Rs 5,000 threshold, you need to file ITR 2 to report such income. Always report such income while filing the ITR whether it is exempt or not.
Income from salary along with income under the other heads
Apart from income from other sources, salaried people may also get income under other heads. Usually, in such cases, the salaried taxpayers become ineligible to file the ITR 1, and they have to select the appropriate ITR form. For example, if a salaried taxpayer has got income from more than one housing property then ITR 1 does not apply to them. If the salaried person also works as a freelancer, that income will come under business and profession, and even then the salaried person is not eligible to file ITR 1.
In conclusion, it may get a bit confusing for some taxpayers to assess their income from other sources while filing ITR. It's safer to consult a tax advisor if you get stuck at any point. That being said, since the last day to file FY2018-19 ITRs for individuals, Hindu Undivided Families, BOIs and AOPs without having to pay any penalty is July 31, it makes sense to file your returns at the earliest to avoid any last-minute glitches.
(The author is CEO, Bankbazaar.com)