Casual Income

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Casual Income

Definition: Casual income refers to irregular, non-recurring income. Examples include winnings from lotteries, horse races, and crossword puzzles.

Key Conditions:

  • No Expenditure or Allowance:
    • No deductions for expenses or allowances are permitted against casual income.
  • No Deductions under Chapter VI-A:
    • Deductions under Chapter VI-A (like Section 80C for investments) are not allowed against casual income.
  • No Adjustment with Basic Exemption Limit:
    • Casual income cannot be adjusted against the unutilized portion of the basic exemption limit.

Examples:

  • Lotteries: Winnings from lottery tickets.
  • Horse Races: Earnings from betting on horse races.
  • Crossword Puzzles: Prizes from crossword puzzle contests.
  • Game Shows: Winnings from participating in game shows or reality contests.

Basic Concepts of Income Tax

Income Tax Law in India: The Income Tax law in India is composed of the following elements:

  • Income Tax Act, 1961:
    • Contains major provisions related to Income Tax in India.
  • Income Tax Rules, 1962:
    • Rules framed by the Central Board of Direct Taxes (CBDT) for the administration of Direct Tax.
  • Finance Act:
    • Enacted annually to update the tax laws and rates.
  • Circulars and Notifications:
    • Issued by the CBDT to clarify provisions and resolve ambiguities.

Types of Taxes:

  • Direct Tax:
    • Levied directly on income (e.g., Income Tax, Wealth Tax).
  • Indirect Tax:
    • Levied on goods and services, with the burden shifted to consumers (e.g., GST).

Concept of Income: Income is broadly classified in tax law and includes various forms like cash, kind, legal, and illegal income, as well as temporary or permanent income.

Key Terms:

  • Person:
    • Includes individuals, HUF, companies, firms, AOP/BOI, local authorities, and artificial juridical persons.
  • Assessee:
    • Any person liable to pay taxes.
  • Assessment Year:
    • The year in which income of the previous year is assessed (e.g., 1st April to 31st March).
  • Previous Year:
    • The financial year in which income is earned.

Heads of Income:

  • Income from salaries.
  • Income from house property.
  • Profits and gains of business or profession.
  • Capital gains.
  • Income from other sources.

Tax Rates:

  • Vary based on income slabs and categories of taxpayers (e.g., individuals, senior citizens).

Surcharge:

  • An additional tax on higher income groups.

Education Cess:

  • An additional 3% (2% for education and 1% for secondary and higher education) on income tax liability.

Summary

Agricultural Income: Income from agricultural operations, rent or revenue from agricultural land, processing agricultural produce, and associated buildings.

Casual Income: Irregular, non-recurring income like lottery winnings, with no deductions allowed.

Income Tax Concepts: Governed by the Income Tax Act, 1961, includes various types of taxes, definitions, assessment years, heads of income, and tax rates, with specific provisions for deductions and surcharges.