Section 2(24) (ix) of the act includes following receipts within the scope of the term ‘Income’ –
- Winning from lotteries,
- Winning from crossword puzzles,
- Winning from races (including horse races),
- Winning from card games and other games of any sort
- Winning from gambling or betting of any form or nature
The term ‘lottery’ is defined to include winning from prizes awarded to any person by draw of lots or by chance or, in any other manner whatsoever, under any scheme or arrangement by whatever name called. Further the expression “card games and other game of any sort” is defined to include any game show, any entertainment programme on television or electronic mode, in which people complete to win prizes or any other similar game.
Thus, the above incomes are taxable under the provision of act. The word “casual Income has not been defined by the Income Act but in general terms these types of income are called as Casual Income and currently such income is taxed at 30% rate plus education cess and surcharge (if any).
Treatment or Taxation:
- Casual income is always taxable under section 56 of the Income Tax Act, under head of income from other sources
- Actual expenses incurred for earning casual income are not allowed because of restriction imposed in section 58(4) “In the case of an assessee having income chargeable under the head “Income from other sources”, no deduction in respect of any expenditure or allowance in connection with such income shall be allowed under any provision of this Act in computing the income by way of any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature, whatsoever”.:
- No deduction is allowed under chapter VI-A. (However, the casual income is a part of GTI for the purpose of computing deduction under chapter VI-A), which means person will not get any deduction under section 80A to 80VV which includes deduction under section 80C and related provisions.
- Basic exemption of Rs. 1,60,000 or 1,90,000 or 2,40,000 is also not allowed on income defined under section 2(24)(ix)..
- First rate of tax 115BB (30% + Surcharge + Education cess + secondary and higher education cess) for all assesses.
- Losses cannot be set off against casual income. (However, some experts are of the opinion that casual losses can be set off against, casual income. For, example, loss from betting can be set off against income from salary but above issue is debatable in nature and assessee officer can reject your claim)
Grossing up of casual income:
If TDS amount is given in question
Net amount of casual income + TDS amount
If TDS rate is given in question
Net amount of casual income
100 – TDS rate
In which year it is chargeable to tax-
Where an assessee does not maintain any books of accounts, lottery prize won by him would accrue in the year in which it is received by the assessee and not in year in which the prize is declared – CIT v. M Ramachadran  (Mad)
Reference: Section 2(24) of the Income Tax Act, 1961
2(24) “income” includes
(i) Profits and gains;
(iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes [or by an association or institution referred to in clause (21) or clause (23), or by a fund or trust or institution referred to in sub-clause (iv) or sub-clause (v) [or by any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via)] of clause (23C) of section 10 [or by an electoral trust]].
Explanation.—For the purposes of this sub-clause, “trust” includes any other legal obligation;
(iii) the value of any perquisite or profit in lieu of salary taxable under clauses (2) and (3) of section 17 ;
(iiia) any special allowance or benefit, other than perquisite included under sub-clause (iii), specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the performance of the duties of an office or employment of profit ;
(iiib) any allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost of living ;]
(iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid ;
(iva) the value of any benefit or perquisite, whether convertible into money or not, obtained by any representative assessee mentioned in clause (iii) or clause (iv) of sub-section (1) of section 160 or by any person on whose behalf or for whose benefit any income is receivable by the representative assessee (such person being hereafter in this sub-clause referred to as the “beneficiary”) and any sum paid by the representative assessee in respect of any obligation which, but for such payment, would have been payable by the beneficiary ;]
(v) any sum chargeable to income-tax under clauses (ii) and (iii) of section 28 or section 41 or section 59 ;
(va) any sum chargeable to income-tax under clause (iiia) of section 28 ;]
(vb) any sum chargeable to income-tax under clause (iiib) of section 28 ;]
(vc) any sum chargeable to income-tax under clause (iiic) of section 28 ;]
(vd)] the value of any benefit or perquisite taxable under clause (iv) of section 28 ;
(ve) any sum chargeable to income-tax under clause (v) of section 28 ;]
(vi) any capital gains chargeable under section 45 ;
(vii) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the First Schedule ;
(viia) the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members;]
(viii) [Omitted by the Finance Act, 1988, w.e.f. 1-4-1988. Original sub-clause (viii) was inserted by the Finance Act, 1964, w.e.f. 1-4-1964;]
(ix) Any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever.]
[Explanation.—For the purposes of this sub-clause,—
(i) “lottery” includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme or arrangement by whatever name called;
(ii) “card game and other game of any sort” includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game ;]
(x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees’ State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees ;]
(xi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.
Explanation.—For the purposes of this clause*, the expression “Keyman insurance policy” shall have the meaning assigned to it in the Explanation to clause (10D) of section 10 ;]
(xii) any sum referred to in [clause (va)] of section 28;]
(xiii) any sum referred to in clause (v) of sub-section (2) of section 56;]
(xiv) any sum referred to in clause (vi) of sub-section (2) of section 56;]
(xv) any sum of money or value of property referred to in clause (vii) [or clause (viia)] of sub-section (2) of section 56;]
The following sub-clause (xvi) shall be inserted after sub-clause (xv) of clause (24) of section 2 by the Finance Act, 2012, w.e.f. 1-4-2013:
(xvi) any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of sub-section (2) of section 56;