NISM-Series-X-B: Investment Adviser (Level 2) · Income from Other Sources

Winnings, Family Pension and Other Specific Incomes

Updated 11 October 2026

Winnings from lotteries, crosswords, card games, races and betting are taxed at a flat 30%, plus surcharge and cess, with no deduction or basic exemption set-off. Online game winnings are taxed separately under Section 115BBJ. Family pension is taxed under Other Sources, with a deduction of one-third of it or a fixed cap, whichever is lower.

Understand Other Specific Incomes: Winnings, Family Pension, Others

Income from Other Sources is the residuary head. Any income that is taxable but does not fit salary, house property, business or capital gains lands here. The Act also lists some items specifically, so you must know them.

Winnings from lotteries, crossword puzzles, races including horse races, card games and other games, and betting are taxed under this head. The rate is a flat 30% under the special rate provision (Section 115BB), plus surcharge and cess. For these winnings, the tax is not reduced by any expense. You cannot deduct the cost of the ticket or the bet.

Winnings from online games are taxed separately under Section 115BBJ, not under Section 115BB. The flat 30% applies to the net winnings for the year, and the only deduction allowed is the cost of acquisition.

The flat rate has a key consequence. Winnings are taxed first and separately. The basic exemption limit and Chapter VI-A deductions cannot be used against them. Losses from other activities, such as a lottery loss or a race loss, cannot be set off against winnings.

The payer also deducts tax at source at 30%. Section 194B applies to winnings from lotteries, crossword puzzles, card games and other games. Section 194BA applies to winnings from online games.

Family pension is the pension received by a family member after the death of an employee or pensioner. It is taxed under Other Sources, not Salary. A person who receives it in the family capacity is taxed at normal slab rates on the balance after the deduction under Section 57(iia). The deduction depends on the regime:

Old tax regime: one-third of the family pension or ₹15,000, whichever is less.
New tax regime: one-third of the family pension or ₹25,000, whichever is less. This cap applies from FY 2024-25 (AY 2025-26).

Other items listed here include income from letting of machinery, plant or furniture (Section 56(2)(ii)), but only when it is not taxed as business income. If the building is let together with the machinery, plant or furniture and the letting of the two is inseparable, the whole composite rent is taxed under Income from Other Sources (Section 56(2)(iii)), unless it is taxed as business income. Keep in mind that only the income actually received or accrued is taxed in the right year.

Key formulas to remember

Tax on winnings: Tax = 30% × winnings, plus surcharge and 4% cess; Flat special rate: Section 115BB for lotteries, crosswords, races, card games and similar winnings, and Section 115BBJ for online games. No deduction for cost of ticket or bet under 115BB (115BBJ allows only cost of acquisition), and no set-off of the basic exemption limit.
Family pension deduction (old regime): Deduction = lower of (⅓ × family pension) and ₹15,000; Taxable family pension = family pension − deduction.
Family pension deduction (new regime): Deduction = lower of (⅓ × family pension) and ₹25,000; The ₹25,000 cap applies under the new regime from FY 2024-25 (AY 2025-26). Read the question for which regime and year apply.
Set-off rule for winnings: Losses from games, lotteries or races cannot be set off against any income; Chapter VI-A deductions are also not allowed against winnings.

How to solve Other Specific Incomes: Winnings, Family Pension, Others questions

Use this order for any question on winnings, family pension or other specific incomes.

1Identify the item: winnings, family pension, letting of machinery, or another listed income.
2Confirm the head is Income from Other Sources, not Salary or Business.
3For winnings, apply the flat 30% to the full amount. Ignore expenses, ticket cost and exemption limits.
4For family pension, compute one-third of it and compare with the cap (₹15,000 old regime, ₹25,000 new regime from FY 2024-25). Deduct the lower figure.
5For letting of machinery, plant or furniture, check whether the building was let together. If the two are inseparable, the entire rent is taxed under Other Sources.
6Add surcharge if applicable, then 4% cess on tax plus surcharge.
7Check the answer options for traps such as the wrong cap or deduction against winnings.

Quickest way: Three-second classification

When to use it: When the question is a short MCQ and the options are numerical.

Winnings: multiply by 30% and add 4% cess. Nothing is subtracted.
Family pension: take one-third, cap it by ₹15,000 or ₹25,000 as per regime, subtract from the pension.
Any option that uses the basic exemption or a Chapter VI-A deduction against winnings is wrong.

Common mistakes in Other Specific Incomes: Winnings, Family Pension, Others

Deducting the lottery ticket cost or bet amount before applying 30%.
You treat winnings like business profit.
Fix: Tax the gross winnings. No expense is allowed against them.
Using the basic exemption limit to reduce tax on winnings.
You apply slab logic to a flat-rate income.
Fix: Winnings are taxed at a special rate, so the exemption limit and Chapter VI-A deductions are not available against them.
Taxing family pension under Salary.
The word pension suggests salary.
Fix: Family pension is taxed under Other Sources because the recipient is not the employee.
Taking the family pension deduction as one-third without the cap.
You remember only the fraction.
Fix: Deduct the lower of one-third and the cap, ₹15,000 under the old regime and ₹25,000 under the new.
Setting off a lottery or race loss against winnings.
You assume losses always reduce income.
Fix: Such losses cannot be set off against any income and cannot be carried forward.

Worked examples

Example 1

Ms. Rao won ₹4,00,000 in a lottery. She paid ₹5,000 for tickets. Ignoring surcharge, compute tax and cess on the winnings.

Show the solution

Winnings are taxed on the gross amount. The ticket cost is not deducted.
Tax at 30% = 30% × ₹4,00,000 = ₹1,20,000.
Cess at 4% = 4% × ₹1,20,000 = ₹4,800.
Total = ₹1,20,000 + ₹4,800 = ₹1,24,800.

Answer: ₹1,24,800

Example 2

Mr. Shah receives family pension of ₹54,000 in a year. Under the old regime, find the taxable family pension.

Show the solution

One-third of ₹54,000 = ₹18,000.
The cap is ₹15,000.
The lower figure is ₹15,000, so the deduction is ₹15,000.
Taxable family pension = ₹54,000 − ₹15,000 = ₹39,000.

Answer: ₹39,000 under Income from Other Sources

Exam tips

Expect a numerical MCQ where one option subtracts the ticket cost. Reject it.
Check whether the question states the old or new regime before choosing the family pension cap.
Remember that family pension goes under Other Sources, a frequent head-classification trap.
Do not apply the basic exemption or Chapter VI-A to winnings.
On a 2-mark question a wrong answer costs more, so classify the head before computing.

Practice questions from Income from Other Sources

Other Specific Incomes: Winnings, Family Pension, Others: frequently asked questions

What is the tax rate on lottery winnings?

It is a flat 30% under Section 115BB, plus applicable surcharge and 4% cess. No expense or exemption limit reduces it.

How are online gaming winnings taxed?

They are taxed separately under Section 115BBJ, not under Section 115BB. The flat 30% applies to the net winnings for the year, plus surcharge and cess. No deduction is allowed other than the cost of acquisition.

How is family pension taxed?

It is taxed under Income from Other Sources at slab rates. You deduct the lower of one-third of it and ₹15,000 under Section 57(iia). Under the new regime the cap is ₹25,000 from FY 2024-25 (AY 2025-26).

Can I set off a gambling loss against winnings?

No. Losses from lotteries, games or races cannot be set off against any income, including other winnings.