A source of income which does not specifically fall under any one of the other four heads of income, namely “Salaries”, “Income from house property”, “Profits and gains of  business or profession”, or “Capital gains” is to be computed and brought to charge under the head “ Income from Other Sources”.

Dividends (from shares and mutual funds) and interest (from bank deposits, postal schemes and other debt products) fall under this head. All the taxable income from this head is added to total income and tax is calculated at regular tax slabs.

Dividend from Equity shares, Equity mutual funds and Debt mutual funds is not taxable in the hands of shareholders. It is totally exempt from tax.

Interest on Bank Deposits, Postal schemes other than PPF, Bonds (other than specified bonds) and debentures is taxable.

Interest on the following is exempt from tax:

1. 1. Interest on notified securities, bonds and certificates:
   1. i. 12-years National Savings Annuity Certificates;
   2. ii. National Defence Gold Bonds, 1980;
   3. iii. Special Bearer Bonds, 1991;
   4. iv. Treasury Savings Deposit Certificates;
   5. v. Post Office Cash Certificates (5 years);
   6. vi. National Plan Certificates (10years);
   7. vii. National Plan Savings Certificates (12 years);
   8. viii. Post Office National Savings Certificates (12 years/7years);
   9. ix. Public Account of Post Office Savings Account Rules (interest upto Rs. 5,000);
   10. x. Post Office Savings Rules;
   11. xi. Post Office CTD;
   12. xii. Fixed Deposit [Government Savings Certificates (Fixed Deposit) Rules, 1968 or Post Office (Fixed Deposit) Rules, 1968];
   13. xiii. Special Deposit Scheme, 1981; and
   14. xiv. Non-Resident (Non-Repatriable) Rupee Deposit Scheme.
2. 2. Interest to an individual and HUF on 7% Capital Investment Bonds.
3. 3. Interest on notified bonds arising to non-resident Indians [i.e, NRI Bonds, and NRI Bonds (Second Series), issued by the State Bank of India].
4. 4. Interest on securities held by the Issue Department of the Central Bank of Ceylon.
5. 5. Interest on 9% Relief Bonds, 1987 in the case of individuals and HUF.

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