All those incomes which are not covered in any of the four heads of income namely salary, house property, capital gains and business and profession is included in the head of income from other sources.
Interest on Bank Saving Account
Bank interest is taxable under ‘Income from other sources.
However, the deduction upto Rs. 10,000/- is available under section 80TTA for the individuals and HUF and the deduction upto Rs. 50,000/- is available under section 80TTB for the senior citizens.
Example: Mr. Manish has earned Rs. 25,000/- as interest for 6 months credited on 30th Oct. 2017, Rs.23,000/- as interest for 6 months credited on 31st December 2017 and Rs. 12,000/- as interest for 6 months credited on 31st March 2018.
Now, for the F.Y. 2017-18, interest is to be calculated from April 2017 to March 2018.
Therefore total interest to be included in the return is Rs. 60,000/- (25,000 + 23,000 + 12,000).
Now, from this Rs. 60,000/- interest income, a deduction of Rs. 10,000 is available under section 80TTA. So, Mr. Manish will need to pay tax on the remaining amount Rs. 50,000/- as per the slab rate applicable to him.
Interest on Term Deposits
Interest from both fixed deposit and recurring deposits is taxable and they are shown under income from other sources.
Banks are required to deduct tax when interest income from deposits in the bank is more than Rs.10,000 in a year. A 10% TDS is deducted if PAN details are available.
If you are collecting pension on behalf of a deceased person, then you have to show this income under income from other sources.
There is a deduction of Rs 15,000 or one-third of the family pension received whichever is lower from the Family Pension Income. It will be added to the income of the taxpayer and the tax should be paid at the tax rate which is applicable.