Winning from lotteries
any winnings from:
2) crossword puzzles,
3) races including horse races,
4) card games and other games of any sort
5) gambling or batting of any from or nature whatsoever, are chargeable to tax as “income from other source”.
As per section 58(4) in case of an assessee having from winning from lotteries, crossword puzzles, etc., no deduction in respect of any expenditure or allowance in connection with such income shall be allowed while computing such income. in other words, the entire income of winnings, without any expenditure or allowance, will be taxable. in fact, deduction under section 80c to 80u discussed later in the chapter on deductions from gross total income will also not be available from such income although such income is a part of the total income.
Income accruing to an agent/trader in respect of prizes on unsold/unclaimed lottery tickets in possession of the agent/trader is income from business and does not constitute winning of lotteries.
Following contry views have been given by kerala and allaabad high courts on this issue:
Amount of prize received on unsold lottery tickets by a lottery stockiest in an income, by way of winning prize from lottery, taxable under section 115bb
where an assessee is a lottery distributor receipt on winning from lottery by the distributor was not in his capacity as a lottery distributor but as a holder of lottery tickets. therefore, it cannot be treated as business income. further, winning from lotteries are assessable under the special provisions of section 115BB i.e. special rate of tax @30% would apply, irrespective of the head under which such income falls.
when an assessee does not maintain any books of account, lottery prize won by him would accrue in the year in which it is received by the assesse and not in year in which prize is declared.
8.7a Grossing up of lottery income, etc.; As in the case of some other incomes, there is also a provision for tax to be deducated at source from income from winning of lotteries, horse races and crossword puzzles. the rate of TDS from the income from winning of lotteries, horse races and crossword puzzles. the rate of TDS from the assessment year 2016-17 in the case of such incomes is 30% if the income exceeds 10,000 such tax deducated at source is income and the amount recevied is net income after deduction of tax at source. in this case, such net income will have to be grossed up as sunder:
8.7b Special rate of income-tax in case of winnings from lotteries, crossword puzzles, races, etc. (section 115BB)
Although, Winnings from lotteries, etc. is part of total income of the assessee, such income is taxable at a special rate of income-tax, which at present, is 30% + surcharge if applicable + health and education cess @4%
It may, however, be mentioned that according to section 58(4), no deducation in respect of any expenditure or allowance, in connection with such income, shall be allowed under any provision of the income-tax act. However, expenses relating to the activity of owning and maintaining race hourses are allowable.
as lottery income is taxed at flat rate, the basic maximum exemption of income (say 250000 ) is not available to the assessee
As per section 58 (4) no deducation in respect of any expenditure or allowance in connection with such income, shall be allowed under any provision of act in computing the income by way of winning 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, whatsover.
However, Expenses relating to the activity of owning and maintaining race horses are allowable.
Thus no loss from any source or head of income can be set off from such income and gross income from such winning shall be taxable.
Interest on securities (section 56(2) (id))
Income, by way of interest on securities, is chargble under the head “income from other source”, if push income is not chargble to income-tax under the head, “profit and gains of business or profession”.
Meaning of security: the meaning of security has not been given under the income-tax act. the general meaning of security is an acknowledgment of a debt or claim, the payment of which is secured. therefore, unless and until a debt is secured, it shall not be referred to as security. debentures issued. therefore, unless and until a debt is secured, it shall not be referred to as security. debentures issued by companies are secured debt and are, therefor called securities, while equity shares are not secured and hence income on these shares shall not be taxable as interest on securities.
According to section 2(28B) “Interest on securities” means:
(1) Interest on any security of the central government or a state government;
2) interest on debentures or other securities for money issued by, or on behalf of a local authority or a company or a corporation established by central, state or provincial act.
Thus securities may be divided into following categories:
(1) securities issued by central/state governments;
2) debentures/bonds issued by a local authority;
3) debenture/bonds issued by companies;
4) debenture/bonds issued by a corporation established by a central, state or provincial Act i.e. autonomous and statutory corporations.