What Is Section 56 Of Income Tax Act And How Does The Rule Apply?
Income sources dealt with under Section 56 of the Income Tax Act include dividends, one-time payments, advance payments, severance packages, and revenue from renting machinery.
Income sources dealt with under Section 56 of the Income Tax Act include dividends, one-time payments, advance payments, severance packages, and revenue from renting machinery.
Tax On Income From Other Sources
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Section 56 of the Income Tax Act deals with income from other sources, such as dividends, interest, gifts, receipts, etc., subject to certain conditions and exclusions. Understanding these taxation rules will help senior citizens easily navigate their tax liabilities as they often depend on these income sources for a living post-retirement.
Also Read: How Is Tax Evasion Different From Tax Avoidance: Know The Consequences
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Here are some income sources which are dealt with under Section 56 of the Income Tax Act:
Dividends: Dividends are subject to taxation under Section 56(2) (i) of the Act under the heading “income from other sources”, depending on the company’s residential status at the time of the payment of the dividend.
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One-Time Payment: Revenue received as a one-time payment from lotteries, games, races, gambling, etc., will attract taxes. These incomes are subject to a 4 per cent cess and a 30 per cent tax rate.
PPF Contribution: If the employer does not credit the employee’s payments towards pension funds, provident funds, or the employee’s state insurance, the amount will be subject to taxes.
Advance Payments: Money received in advance or during negotiations for transferring a capital asset will be taxable.
Revenue From Renting Furniture And Machinery: Revenue from renting out furniture, machinery, etc., will attract taxes under Section 56(2) (ii)) of the Act.
Severance Package: Money received by an individual when leaving jobs as part of a severance package may be subject to additional taxes under Section 56(2) (xi) of the Act.
Also Read: What Should Seniors Look For In An Automobile? 6 Things You Must Have For Road Safety
Life Insurance: Proceeds greater than the premiums paid for a life insurance policy will be subject to taxation. Payments exempt under Section 10(10D) of the Act are not included here.
Gifts: Gifts worth more than Rs 50,000 (moveable or immovable assets) in a financial year are taxed, barring those from family members during marriage, inheritance, etc.
Property Transactions: Property transactions, movable or immovable, attract income tax and stamp duty, subject to certain conditions.
Gifts received without consideration from relatives, as per the defined list in Section 56(2)(x), are tax-exempt. Marriage gifts are non-taxable, while those received on birthdays or anniversaries are taxable. Inheritances, gifts under a will, and those obtained in anticipation of the donor’s death are tax-free. The sale of movable personal property like vehicles or furniture is not taxable. Exemptions also apply to gifts from specified entities outlined in the sections.
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Investors who frequently trades in stocks should use this method to get details of tax liabilities for ITR
The income tax department processes a tax refund claim after the taxpayer e-verifies the ITR. Depending on the case's complexity, this typically takes four to five weeks.
Section 80TTB was introduced in the Income Tax Act to provide tax relief to senior citizens.
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