Tax on interest, gifts and pension: income from other sources
Interest, most gifts and family pension are taxed at your slab
Figures checked 2026-10-31
Not all your income is salary. Interest from your bank, some gifts and a family pension also count, and they’re taxed too. Tax law puts them in one bucket called income from other sources.
How it’s taxed. This income is added to your salary and everything else, and the total is taxed at your slab rate. So the same 10,000 rupees of interest costs a person in a higher slab more tax than someone in a lower one. It’s part of your gross total income.
Bank interest. Interest from a savings account and from fixed deposits is fully taxable, even when an FD adds it back instead of paying it out. Under the old regime, you can deduct up to 10,000 rupees of interest a year, or 50,000 rupees if you’re a senior citizen. The new regime doesn’t give this deduction.
TDS on interest. The bank cuts TDS once your interest from it crosses 50,000 rupees a year, or 1 lakh rupees for senior citizens: 10% with your PAN, 20% without. If your income is below the taxable limit, you can file Form 121, which replaced Forms 15G and 15H in April 2026. Our guide to TDS on FD interest covers it.
An illustration. Say your salary already puts you in the 15% new-regime slab, and your FDs earn 60,000 rupees of interest this year. The bank cuts 10% TDS, 6,000 rupees, because the interest crossed 50,000. But your real tax on that interest is 15% plus 4% cess, about 9,360 rupees. You pay the other 3,360 rupees when you file. People often miss this and get a tax notice later.
Gifts. Gifts from relatives are never taxed: parents, a spouse, siblings and other specified family. Gifts on your marriage, and money you inherit, are also tax-free. Gifts from anyone else, like friends, are a different story.
Did you know? The 50,000 rupee gift limit is a yearly total, and crossing it makes the whole amount taxable, not just the excess. Gifts from friends worth 40,000 and 15,000 rupees in the same year add up to 55,000 rupees, all of it taxable. Gifts in kind, like gold or shares, count at their value too. Check the current rules on incometaxindia.gov.in.
Family pension. If you receive a pension after a family member who was an employee dies, that’s family pension, taxed under this head. You can deduct one-third of it, up to 25,000 rupees a year under the new regime or 15,000 rupees under the old.
How to report it. Your bank reports interest to the tax department, and it shows up in your Annual Information Statement, or AIS, the tax department’s record of your income. Match it against your own records and report all of it under “other sources” in your return. Unreported interest is one of the most common reasons for a tax notice.
The takeaway. Interest, gifts from non-relatives above 50,000 rupees a year, and family pension are all taxed at your slab. TDS is only an advance, so pay any gap when you file. Check your AIS, report everything, and keep records of large gifts from family.
More to read: how your salary is taxed, the new Income-tax Act, explained, and old vs new tax regime.
Questions people ask
What is income from other sources?
It's the tax bucket for income that doesn't fit salary, house property, business or capital gains. For most people, that means savings account and fixed deposit interest, gifts above the limit, family pension, and dividends. It's added to your other income and taxed at your slab rate.
Is FD interest taxable?
Yes. FD interest is fully taxable at your slab rate, whether the bank pays it out or adds it back to the deposit. The bank also cuts TDS once a year's interest from it crosses 50,000 rupees, or 1 lakh rupees for senior citizens. TDS is only an advance; you settle the real tax when you file your return.
Are gifts from relatives taxable?
No. Gifts from relatives, such as parents, a spouse, siblings and other specified close family, are not taxed, whatever the amount. Gifts received on your marriage and money you inherit are also exempt. Gifts from non-relatives, like friends, become taxable once their total value in a year crosses 50,000 rupees.
Is the 50,000 rupee gift limit per gift or per year?
Per year, in total. If gifts from non-relatives add up to more than 50,000 rupees in a tax year, the whole amount is taxable, not just the part above 50,000. Check the current rules on the Income Tax Department's website, since limits can change.
Sources
- Income Tax Department, Tax treatment of gifts received by an individual or HUF Gifts from non-relatives taxable when the yearly total exceeds Rs 50,000, whole amount taxable; relatives, marriage and inheritance exempt. Check the current rules.
- TDS on bank interest under the Income-tax Act, 2025 Rs 50,000 a year (Rs 1 lakh for senior citizens) per bank; 10% with PAN, 20% without. Forms 15G and 15H replaced by Form 121 from 1 April 2026. Check the current limits.
- Deductions for interest and family pension Interest deduction of up to Rs 10,000 (Rs 50,000 for senior citizens) under the old regime; family pension deduction of one-third, up to Rs 25,000 (new regime) or Rs 15,000 (old regime), as reported by tax publications. Check the current rules.