Prajna Capital - An Investment Guide

A guide on the laws governing tax on windfall earnings. DO WINNINGS QUALIFY AS INCOME? It’s indeed painful to forego a part of your winning amount, and hence it’s your right to know why you are subjected to pay income tax on winnings, especially when they are not regular source of income like salary. The Income Tax Act 1961 has a quick answer to your query. Under section 2(24) of the Act, windfall earnings in the nature of winnings from lotteries, crossword puzzles, card games, any form of gambling, betting or any type of race (including horse races) which do not have an element of regularity, have been specifically clarified to be income. Being a form of income, it is then subject to taxation. As per section 56(2)(ib), windfall earnings are classified under the head income from other sources. However, when you are paying your tax at the end of the year, if your total income includes income from sources such as lotteries, card games and so on, under section 115 BB, the total income tax...