Filing your ITR? Don't forget to disclose 'Income from Other Sources'

Income tax return: When preparing your 2024 income tax return, it's crucial to include all types of income, especially those not classified under salary, house property, business, or capital gains. Failing to report 'Income from Other Sources,' such as interest, dividends, and gifts, can lead to complications and penalties.

Common pitfalls to avoid

Arpit Suri, a chartered accountant based in Noida, highlighted that one of the most frequent errors in tax filing is the omission of income from all sources.

"Taxpayers must disclose all types of income, including interest, dividends, royalties, and rent, as well as any exempt income. Moreover, resident taxpayers should report all foreign assets and income earned abroad," Suri advised.

He stressed that ‘Income from Other Sources’ often gets overlooked. Many salaried individuals, for example, may only report their salary and neglect to include interest income or rental income. Suri warns, “Neglecting to report these sources can lead to complications, penalties, and a prolonged assessment process.”

What falls under ‘Other Sources’?

As the name implies, ‘Income from Other Sources’ is a residual category encompassing earnings not classified under the primary heads: salary, house property, business or profession, and capital gains. This category includes various types of income such as:

• Interest Income: From savings accounts, fixed deposits (FDs), recurring deposits (RDs), and bonds. While banks credit this income directly to your account, it's essential to report it in your ITR regardless of the amount. Taxpayers under 60 can claim an exemption of up to Rs 10,000 on savings account interest under section 80TTA. Senior citizens, however, can claim up to Rs 50,000 under section 80TTB, covering interest from all deposits.
• Dividend Income: From shares and mutual funds.
• Monetary Gifts: Exceeding Rs 50,000 in a financial year from non-relatives.
• Winnings: From lotteries, crosswords, and game shows, which are taxed at a flat rate.
• Family Pension: Received by family members after the pensioner’s death.

Why accurate disclosure matters

Choosing the right ITR form is crucial based on your income sources. Forms ITR-1, ITR-2, ITR-3, and ITR-4 can be used to report ‘Income from Other Sources’. Non-disclosure of any income can be viewed as tax evasion, as the Income Tax Department employs data matching and third-party reporting to identify undeclared income.

Penalties and interest may be imposed for any tax shortfall or delay in advance tax payments under Sections 234B and 234C of the Income Tax Act. To ensure a hassle-free tax filing experience, it is vital to prepare thoroughly and disclose all income sources accurately.

By meticulously reviewing and reporting all income sources, you can avoid potential issues and ensure compliance with tax regulations.