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.
But if you are earning money from a business or job, it is not casual income because it is regular.
Examples of Casual Income
- 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.
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How to declare casual income?
- 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.
What is not casual income?
- 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.
Also Read: Savings Account Minimum Balance Rule
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
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!