In simple terms, easy earning means casual income. Still need more information. So let’s find out. A friend of mine won the lottery, and he had to pay taxes on it. At that time, he told me that winning the lottery was considered casual income. I was surprised to hear this, so I started reading about it. I came to know that casual income is an income that is received unexpectedly and is not regular.
What is Casual Income?
Casual income is income that is received suddenly and once, which is not regular in nature. This income is not expected by you, and there is no contract or specific plan for this. For example, if you win the lottery, or win prizes in a game show, then it is casual income. I think this income depends a bit on luck, and you are never sure whether you will get it again or not. In the Income Tax Act, it is included under the category of “Income from Other Sources” and is taxed separately.
The characteristic of casual income is that it is not regular, and you do not work or do any business for it. For example, if someone won a prize in a crossword puzzle, he had to pay tax on it as casual income. But if you are earning money from a business or job, it is not casual income because it is regular.
Examples of Casual Income
Let me give you some examples of what casual income is so that you can understand it:
- Winning the lottery: If you buy a lottery ticket and win Rs 1 lakh from it, then it is casual income.
- Game show or quiz: Winning prizes by participating in a quiz show on TV.
- Horse racing or betting: Winning money in horse races or making a profit from betting on sports.
- Crossword or puzzle: Winning money or goods by winning a crossword competition.
- Card games: Getting money from poker or other card games.
But remember, if you are in the business of selling lottery tickets, that income is not casual income but comes under the category of “Profits and Gains of Business”.
How is casual income taxed?
Casual income is taxed under Section 115BB of the Income Tax Act. It is taxed at a flat rate of 30%, and when education cess (cess) is added, it becomes 31.2%. For example, if you win a lottery of Rs 1 lakh, you will have to pay Rs 30,000 as tax, and a little more tax (cess) may be levied on it. But there is no exemption or waiver:
- No deduction of expenses: The cost of purchasing lottery tickets or other expenses cannot be deducted.
- Exemption is not applicable: No matter how low your other income is, you are not exempt from casual income.
- TDS: If you win prizes exceeding Rs 10,000, the institution providing it (e.g., lottery company) deducts 31.2% TDS and pays you the money.
E.g., As I mentioned one of my friends won a lottery of Rs 1 lakh, but he got only Rs 68,800 because Rs 31,200 was deducted as TDS. Later, he had to file a tax return and pay the remaining tax.
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How to declare casual income?
It is very important to declare casual income; otherwise, the Income Tax Department can send a notice. Let me tell you some simple steps:
- File return: Show casual income in your income tax return (ITR) under the “Income from other sources” category.
- TDS certificate: The information about TDS deducted from you will be in Form 26AS. Check it.
- Show example: For example, keep a bill or receipt of winning the lottery, so that there is proof.
- Take expert advice: If you don’t understand, see a chartered accountant. My friend did this, and it helped him a lot.
What is not casual income?
(Casual Income Includes What Not) Not all sudden, money became casual income. Some things do not fall under it:
- Income from a business or job: For example, regular money as a freelancing or consultant.
- Income from sale of property: For example, money from selling a house (this is a capital gain).
- Gifts: Gifts received from relatives on the occasion of marriage or birthday are not casual income, but if they exceed Rs 50,000 and come from outside the family, then tax may be applicable.
- Insurance claim: Money received from insurance is not casual income.
My uncle gave me Rs 20,000 for my wedding, and it was not taxed because it was a gift.
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Some important tips
- Pay taxes on time: If you do not pay taxes on casual income on time, you may be fined. I told my friend to file his return early.
- Keep evidence: Keep the lottery or game show bill so that the tax audit will not be a problem.
- Don’t spend too much money: Don’t spend it immediately after receiving casual income because you have to set aside money for taxes.
- Understand the rules: The rules of the Income Tax Act can change, so check the latest information every year.
Final Thought on Casual Income
I think casual income is a special thing because it involves luck. But it is important to remember that it is taxed. My friend was happy when he won the lottery, but after paying the taxes, he realized that he also had a responsibility. If you also ever win money from lottery or games, understand all this and pay taxes correctly. If you have any more questions, be sure to ask me. I will tell you in simple terms! Now, learn about casual income and handle it with caution!
FAQs:
1. What is casual income in income tax?
Casual income is sudden, non-regular income like lottery wins, game show prizes, or betting gains, taxed under “Income from Other Sources” at 31.2% in India.
2. What are examples of casual income?
Examples include lottery winnings, quiz show prizes, horse racing profits, crossword rewards, and card game earnings, as per income tax rules.
3. How is casual income taxed in India?
Casual income is taxed at a flat 30% plus 1.2% cess (total 31.2%), with no deductions or exemptions, and a TDS of 31.2% applies if over ₹10,000.
4. Do I need to declare casual income in my tax return?
Yes, declare casual income under “Income from Other Sources” in your ITR, keep proof like lottery tickets, and check Form 26AS for TDS details.
5. Is all sudden income considered casual income?
No, business income, property sale gains, or gifts from relatives (below ₹50,000) aren’t casual income; only windfalls like lotteries qualify.