Income from Other Sources
The income tax department is in a kind of favorable situation because of this head of income. It is because through this head of income, it becomes easier for the department to cover many things under the gamut of taxation. Income from other sources is considered as a residuary head of income i.e. an income which is not taxable under any other head and which is not tax-free would fall under this category.
Are you aware of the fact that gifts received in the form of cash or immovable property or movable property is taxable? What? Does it mean that everyone is paying taxes for the gifts received from father or father-in-law…? Actually the taxation scenario depends on who has given the gift and what had been gifted to them? Gifts received from a relative would not be taxable at all. But is every relative considered as relative as per the Income tax Act. The answer to this is ‘no’. Relative for this purpose includes spouse, brother or sister, father and mother, grandfather and grandmother, sons or daughters, brother or sister of the parents. So, does it mean that one has to pay tax when received from any other relative? The answer is ‘no’. There is a limit till which the gift can be received. If cash received as gift is not more than Rs 50,000, then it is not taxable. Similarly, movable properties received as gifts would not be taxable if the total value is not more than Rs 50,000. Also, if the value of one immovable property which has been gifted does not exceed Rs 50,000; then it would not be taxable. The rationale of relative applies to movable and immovable properties as well.
Imagine a situation when huge gifts are received on the occasion of marriage by bride groom & bride and the income tax department demands both of them to pay taxes for the gifts received. This would be an annoying situation for both the bride groom and bride. Hence, the income tax department is not levying taxes for gifts received on the occasion of marriage. Similarly, the department will not be levying taxes in few situations such as gift received under a will or by way of inheritance, from any registered trust or institution, etc.
Having knowledge of these provisions, few people started to transfer immovable property or movable property at less than market value, at a very nominal rate. However, if there is a difference between market value and the value at which the total value of the movable property or value of one immovable property exceeds Rs 50,000; it would be taxable. Again the rationale of relatives shall prevail over these provisions.
Obviously, any one would be eager to know whether any value can be deducted while taxing the income amount. Yes, the entire income received would not be fully subject to tax in all cases. It is possible to deduct any expenditure spent which fulfills the following conditions:
- The expenditure is not in capital nature
- It is incurred wholly and exclusively for the purposes of earning income