Filing tax returns is a crucial responsibility for every taxpayer. While most individuals report their salaries and business earnings, many forget or overlook other sources of income that are also taxable. Failure to declare all relevant income sources can lead to penalties, interest charges, or even legal consequences. To ensure compliance and avoid unnecessary scrutiny from tax authorities, it is essential to be aware of all the income sources that must be reported. This article will highlight key income sources that should not be ignored when filing your tax returns.
Key Takeaways
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Income tax is taxable under five heads: salary, income from business or profession, Income from house property, capital gains, and other sources. You should report all income that forms part of these heads and is eligible for taxation. The following points discuss some of them:
1. Salary and Perquisites: For salaried individuals, income from salary is the most common component to declare in ITR. It includes:
Basic salary
House Rent Allowance (HRA)
Leave Travel Allowance (LTA)
Bonus and incentives
Perquisites such as rent-free accommodation, a company car, or employer-provided benefits
Employers provide Form 16, which includes salary details and Tax Deducted at Source (TDS). Make sure to cross-check this form while filing returns, as well as claim Section 80C deductions and other relevant benefits.
2. Income from House Property: If you own a house and earn rental income from it, you must report it under "Income from House Property." Even if the house is vacant, a notional rental value may be considered taxable.
Deductions available:
Standard deduction of 30% on rental income
For self-occupied houses, the interest paid on a home loan can be claimed as a deduction, but the rental income from other properties must be disclosed.
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3. Capital Gains: Capital gains arise when you sell an asset, such as real estate, stocks, or mutual funds. It is essential to declare:
Short-term capital gains (STCG) on assets held for less than a specified period (e.g., less than one year for equity).
Long-term capital gains (LTCG) on assets held for a longer duration (e.g., more than one year for stocks).
Tax treatment varies based on asset type:
STCG on stocks is taxed at 15% under Section 111A.
LTCG above ₹1 lakh on stocks is taxed at 10% under Section 112A.
Gains from property sales are taxed based on the holding period, with indexation benefits available for long-term holdings.
Ensure that capital gains from all investments are accurately reported.
4. Interest Income from Savings and Fixed Deposits: Interest earned from various sources is taxable, including:
Savings account interest (exempt up to ₹10,000 under Section 80TTA)
Fixed deposit (FD) interest (fully taxable)
Recurring deposit interest
Interest from bonds and debentures
Banks deduct TDS on interest earned on FDs if it exceeds ₹40,000 for individuals below 60 years of age and ₹50,000 for those above 60 years in a financial year. However, taxpayers must still declare and pay tax on the total interest earned as per the online income tax calculators.
Budget 2025 proposed to raise the TDS threshold limit for interest earned by senior citizens to ₹1 lakh.
Source: PIB
5. Dividend Income: Dividend income from stocks or mutual funds must be declared under "Income from Other Sources."
Dividends exceeding ₹5,000 attract TDS at 10%.
Domestic company dividends are now taxable in the hands of the shareholder at the applicable slab rate.
Always check your Annual Information Statement (AIS) or Form 26AS for dividend details while filing taxes.
6. Freelance and Gig Economy Income: Freelancers, consultants, and gig workers must declare their earnings under "Income from Business and Profession." This includes payments from clients, revenue from online platforms, sponsored content earnings from social media, and more. Taxpayers can claim deductions for expenses incurred while providing services, such as internet charges, software costs, and office rent. The Presumptive Taxation Scheme under Section 44ADA allows professionals to pay tax on 50% of their gross receipts if income is below ₹50 lakh.
7. Agricultural Income: Agricultural income is exempt from tax if it comes from farming activities such as crop cultivation. However, if the income exceeds ₹5,000, it must be reported in the ITR. Non-farming agricultural activities, such as agro-processing, may attract taxation.
8. Gifts and Inherited Wealth: Gifts received from non-relatives above ₹50,000 in a financial year are taxable under "Income from Other Sources."
Gifts from immediate family members (parents, spouse, siblings) are tax-free.
Inheritance and gifts received through a will are also exempt.
If a gifted property generates rental income or capital gains, the recipient must pay tax on the earnings.
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9. Foreign Income and Assets - Indian residents earning foreign income must declare it in their ITR. Common foreign income sources include:
Salary received abroad
Income from foreign investments
Rental income from overseas properties
Non-disclosure of foreign assets can lead to penalties under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015.
10. Pension and Provident Fund Withdrawals - Pension received by retirees is taxable under "Income from Salary." However, commuted pensions for government employees are tax-free. Further, EPF withdrawals before five years of continuous service are taxable. NPS withdrawals are partly taxable, with 60% being tax-free at retirement. The tax exemptions for EPF, NPS, and pension funds form part of 80C deductions.
11. Lottery, Betting, and Prize Winnings - Income from lottery, horse racing, and gambling is taxed at a flat rate of 30% under Section 115BB. No deductions are allowed, and TDS applies on winnings above ₹10,000.
12. Income from Partnership Firms and LLPs - Partners in a firm must report their share of profit, which is tax-free in their hands if the firm pays tax. However, interest on capital and remuneration received from the firm is taxable.
Declaring all income sources when filing your ITR is essential to ensure tax compliance and avoid legal consequences. Many taxpayers unknowingly omit reporting various types of income, leading to penalties and scrutiny. You can ensure an accurate and hassle-free tax filing process by keeping track of all income streams, using an online income tax calculator, and referring to relevant documents like Form 26AS. You should also take note of Chapter VI-A provisions like 80C deductions.
If you have multiple income sources, consulting a tax professional or using a reliable tax filing platform can help you maximise deductions and ensure compliance.
Yes, you can file a revised return under Section 139(5) before the deadline for the relevant assessment year. If you realise that you have missed declaring some income, you should correct it as soon as possible to avoid penalties or scrutiny from the tax authorities.
The department uses various tools like Annual Information Statement (AIS), Form 26AS, bank transaction records, and data from financial institutions to monitor income. High-value transactions, such as large cash deposits, mutual fund investments, and property purchases, are flagged for scrutiny if they do not match reported income.
Yes, even if certain incomes are exempt from tax (such as agricultural income or certain allowances), they must still be disclosed in the relevant sections of the ITR. Declaring exempt income ensures proper documentation and avoids unnecessary queries from the tax department.
Section 80C allows deductions up to ₹1.5 lakh for investments in options like PPF, EPF, life insurance premiums, NSC, ELSS, and home loan principal repayment.
Individuals who do not have taxable income or who do not make eligible investments, such as PPF or life insurance premiums, are not eligible for the 80C deduction.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
