Income from Other Sources (IFOS)

Income from Other Sources (IFOS) is a residual head of income under the Income Tax Act. It covers income that does not fall under the other four heads—Salary, House Property, Business/Profession, or Capital Gains.

If an income cannot be classified anywhere else, it is taxed under IFOS.

1. Common Types of IFOS Income

Typical incomes covered under IFOS include:

• Interest income (savings account, fixed deposits, bonds)
• Dividends from shares or mutual funds
• Gifts received (subject to tax rules)
• Family pension
• Lottery, gambling, or betting winnings
• Rent from letting out plant, machinery, or furniture (in some cases)

2. Tax Treatment

• Most IFOS income is taxed at normal slab rates
• Certain incomes have special tax rates, such as:
  • Lottery or betting income → taxed at 30% (plus surcharge and cess)
• No standard deduction is available (except specific cases like family pension)

3. Deductions Allowed

Deductions under IFOS are limited:

• Expenses directly related to earning that income (in specific cases)
• Interest deduction for certain incomes (like interest on compensation)
• Standard deduction of ₹15,000 or 1/3rd (whichever is lower) for family pension

General personal expenses are not allowed.

4. Gifts and Taxability

• Gifts received from relatives → fully tax-free
• Gifts from non-relatives exceeding ₹50,000 → taxable
• Gifts received on marriage → tax-free

Proper classification is important to avoid errors.

5. TDS on IFOS

• Interest income and certain other payments may have TDS deducted
• Must be reported correctly in ITR and matched with Form 26AS

6. Common Mistakes

• Not reporting interest income (especially savings account interest)
• Ignoring dividend income
• Misreporting gifts
• Assuming TDS deducted = no need to report

Practical Insight

This is where most underreporting happens.

People think:
“Small interest hai, ignore kar dete hain.”

That’s exactly what gets flagged.

The system already captures:

• bank interest
• dividends
• certain transactions

If your return doesn’t match, it triggers issues.

How N D Savla & Associates Can Help

At N D Savla & Associates, we help you:

• Identify and report all IFOS income correctly
• Optimise available deductions
• Reconcile AIS and Form 26AS with your return
• Avoid underreporting and notices