1 ) Any receipt which is of a casual and non-recurring nature is casual income. In other words, casual income is that income the receipt of which is accidental and without any stipulation. It is in nature of an unexpected wind-fall .
Winnings from lottery, crossword puzzles, card games, and other games of any sort or from gambling or betting of any form or nature whatsoever are casual incomes . Receipts even from habitual betting are non-recurring receipts and assessable as casual income.
The casual income does not include :
( a ) capital gains, chargeable under the provisions of section 45; or
( b ) receipts arising from business or the exercise of a profession or occupation; or
( c ) receipts, by way of addition to remuneration of an employee, such as bonus , gratuity , perquisites, etc.
2 ) Voluntary payment received in exercise of an occupation are not treated as casual income , e.g. , tips given in the ordinary way to taxi drivers in the employ of taxi - owners are income arising from the exercise of an occupation . Similarly , gratuities to waiters in a hotel are taxable . A receipt may be taxable as income arising from the legal exercise of the profession even if the amount is received as a gift from third parties to whom the legal services were not rendered and who were under no obligation to pay anything at all .If an architect submitted a plan in a competition for construction of a building , the prize won is income from profession .
3 ) A gift from a relative is not income at all . Birthday and wedding gifts are simplest instances in point . A gift from a relative does not become income merely because it is repeated year after year . A regular allowance given year after year purely as a voluntary gift by a parent to a child or by a husband to his wife , or by one relation to another , is merely a fresh gift every time it is paid and does not amount to income .
4 ) Payment by husband to his wife under an agreement to live apart as maintenance allowance is neither casual income nor a personal gift . Hence , it is taxable .
5 ) Prize awarded for coin collection or stamp collection may be a casual income . This income is due to hobby ..
Other provisions relating to Casual Income
1) Expenses are not deductible . If penses are incurred to receive casual income , such expenses are not deductible from any income . For example , an individual purchases lottery tickets , the cost of lottery tickets is not deductible from any income whatsoever . Similarly , if postal charges have been paid for sending crossword puzzles , such charges ( expenses ) are not deductible from any income .
2) Set - off of losses not permitted . If instead of casual income there is casual loss , such loss cannot be set - off from any income . For example , if a person wins in a card game on the first day and loses the next day , he cannot set - off the loss against any income .
3 ) Tax deduction at source , ( a ) If the winnings from horse race exceed Rs . 2,500 , tax will be deducted at source at the prescribed rate . ( b ) If the winnings from any lottery , crossword puzzle , card game and other game of any sort exceed Rs . 5,000 , tax will be deducted at source at the prescribed rate .