How to Calculate Income Tax from Other Sources in 2023?

Calculating tax from other sources can be tricky because the sources of income can vary significantly. In this article, you will learn about the various types and sources of income, different examples, new tax slabs, and how you can calculate income tax from other sources after the Budget 2023 proposals. Learn more.

Calculate Income Tax from Other Sources

How to Calculate Income Tax from Other Sources in 2023?

On February 1, 2023, Indian Finance Minister Nirmala Sitharaman announced Budget 2023 proposals. She announced many taxes on income proposals, including an increase in the basic tax exemption limit. But what about tax on income from other sources? How can you calculate it? Let's explore.

Multiple Sources of Income under Income Tax

What are the different types of income that are taxed in India?

For easy reporting of taxation, the Income tax department has categorised income into five categories:

  1. Salaried Income
  2. Capital gain or loss
  3. Income from profession or business
  4. House property income
  5. Income from other sources

What does Income from Other Sources mean in India?

According to the IT Act’s Section 56, an income is considered as income from other sources if:

  • An income is already there.
  • That particular income has not been exempted under IT Act’s other provisions
  • The income can't be categorised under any other head, such as:
  • Salaried Income
  • Capital gain or loss
  • Income from profession or business
  • House property income

What are the different types of Other Sources of Income?

Income from other sources can be generated from two sources:

Recurring Income

Many sources generate income for you at regular intervals. Some of the most popular ones are:

  • Post office savings
  • Savings bank
  • Recurring deposits
  • Fixed deposits (FD)
  • Monthly Income Scheme (MIS), etc.

Non-Recurring Income

Certain sources offer you income just once under ITR. Some of the most popular sources are:

  • Gambling
  • Lottery
  • Horse race betting and others

Top 10 Examples of Income from Other Sources

  1. Rental income from:
     - House property renting
     - Vacant plot of land
  2. Insurance commissions
  3. Interest earned from
     - Bank deposits
     - Deposits with companies
  4. Remuneration earned by members of parliament
  5. Interest payment earned from the government on the extra paid tax
  6. Interest earned on any loan you have given
  7. Family pension (which is earned by the legal heir in case of an employee’s death)
  8. Casual income
  9. Dividends earned above Rs. 10 lahks from domestic companies
  10. Income from winning a lottery

How to Calculate Income Tax from Other Sources?

You can calculate tax on income from other sources in two ways:

Case #1: If the Income is Generated from Non-Recurring Sources

You'll have to pay a 30% tax on total income if the income is generated from a causal income or non-recurring source.

Example:

If your causal income is Rs. 1 lakh, you'll have to pay Rs. 30,000 as a tax on income from other sources.

Case #2: Addition to Other Taxable Income

You can add your income from other sources with income from salary, business, or other four sources. When paying taxes, you can pay according to the existing income tax slab.

The new income tax slabs announced during Budget 2023-24 are:

New Income Tax Regime Slabs

  • 0% tax up to Rs. 3 lakh
  • 5% tax on Rs. 3-6 lakh
  • 10% tax on Rs. 6-9 lakh
  • 15% tax on Rs. 9-12 lakh
  • 20% tax on Rs. 12-15 lakh
  • 30% tax above Rs. 15 lakh

Old Income Tax Regime Slabs

  • 0% tax up to Rs. 2.5 lakh
  • 5% tax on Rs. 2.5-5 lakh
  • 20% tax on Rs. 5-10 lakh
  • 30% tax above Rs. 10 lakh

Example of calculation:

Suppose you are receiving an Rs. 50,000 family pension. In that case, as per IT Act, your income will be lowered by:

  • 33.33%, or
  • Rs. 15,000, or Whichever is lower
  • 33.33% of Rs. 50,000 is equal to Rs. 16,665. However, it is higher than Rs. 15,000. Considering the lower value between Rs. 15,000 and 33.33% of the income, the exemption amount will be Rs. 15,000.
  • Now, you have to deduct Rs. 15,000 from your family pension of Rs. 50,000 to get your taxable income, which is Rs. 50,000 - Rs. 15,000 = Rs. 35,000.
  • Now, you have to add Rs. 35,000 of income from other sources to other income. The total taxable income after adding this taxable income of Rs. 35,000 from other sources will be taxed as per the income tax slab.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

How to Calculate Income Tax from Other Sources in 2023?

On February 1, 2023, Indian Finance Minister Nirmala Sitharaman announced Budget 2023 proposals. She announced many taxes on income proposals, including an increase in the basic tax exemption limit. But what about tax on income from other sources? How can you calculate it? Let's explore.

Multiple Sources of Income under Income Tax

What are the different types of income that are taxed in India?

For easy reporting of taxation, the Income tax department has categorised income into five categories:

  1. Salaried Income
  2. Capital gain or loss
  3. Income from profession or business
  4. House property income
  5. Income from other sources

What does Income from Other Sources mean in India?

According to the IT Act’s Section 56, an income is considered as income from other sources if:

  • An income is already there.
  • That particular income has not been exempted under IT Act’s other provisions
  • The income can't be categorised under any other head, such as:
  • Salaried Income
  • Capital gain or loss
  • Income from profession or business
  • House property income

What are the different types of Other Sources of Income?

Income from other sources can be generated from two sources:

Recurring Income

Many sources generate income for you at regular intervals. Some of the most popular ones are:

  • Post office savings
  • Savings bank
  • Recurring deposits
  • Fixed deposits (FD)
  • Monthly Income Scheme (MIS), etc.

Non-Recurring Income

Certain sources offer you income just once under ITR. Some of the most popular sources are:

  • Gambling
  • Lottery
  • Horse race betting and others

Top 10 Examples of Income from Other Sources

  1. Rental income from:
     - House property renting
     - Vacant plot of land
  2. Insurance commissions
  3. Interest earned from
     - Bank deposits
     - Deposits with companies
  4. Remuneration earned by members of parliament
  5. Interest payment earned from the government on the extra paid tax
  6. Interest earned on any loan you have given
  7. Family pension (which is earned by the legal heir in case of an employee’s death)
  8. Casual income
  9. Dividends earned above Rs. 10 lahks from domestic companies
  10. Income from winning a lottery

How to Calculate Income Tax from Other Sources?

You can calculate tax on income from other sources in two ways:

Case #1: If the Income is Generated from Non-Recurring Sources

You'll have to pay a 30% tax on total income if the income is generated from a causal income or non-recurring source.

Example:

If your causal income is Rs. 1 lakh, you'll have to pay Rs. 30,000 as a tax on income from other sources.

Case #2: Addition to Other Taxable Income

You can add your income from other sources with income from salary, business, or other four sources. When paying taxes, you can pay according to the existing income tax slab.

The new income tax slabs announced during Budget 2023-24 are:

New Income Tax Regime Slabs

  • 0% tax up to Rs. 3 lakh
  • 5% tax on Rs. 3-6 lakh
  • 10% tax on Rs. 6-9 lakh
  • 15% tax on Rs. 9-12 lakh
  • 20% tax on Rs. 12-15 lakh
  • 30% tax above Rs. 15 lakh

Old Income Tax Regime Slabs

  • 0% tax up to Rs. 2.5 lakh
  • 5% tax on Rs. 2.5-5 lakh
  • 20% tax on Rs. 5-10 lakh
  • 30% tax above Rs. 10 lakh

Example of calculation:

Suppose you are receiving an Rs. 50,000 family pension. In that case, as per IT Act, your income will be lowered by:

  • 33.33%, or
  • Rs. 15,000, or Whichever is lower
  • 33.33% of Rs. 50,000 is equal to Rs. 16,665. However, it is higher than Rs. 15,000. Considering the lower value between Rs. 15,000 and 33.33% of the income, the exemption amount will be Rs. 15,000.
  • Now, you have to deduct Rs. 15,000 from your family pension of Rs. 50,000 to get your taxable income, which is Rs. 50,000 - Rs. 15,000 = Rs. 35,000.
  • Now, you have to add Rs. 35,000 of income from other sources to other income. The total taxable income after adding this taxable income of Rs. 35,000 from other sources will be taxed as per the income tax slab.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

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