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CA Intermediate · Taxation · Basic Concepts

Anita, a resident individual, has the following during tax year 2026-27: salary income Rs 6,00,000, a lottery win of Rs 1,00,000 (gross, before TDS), and a long-term capital loss of Rs 40,000 on sale of listed shares. Which statement is correct about the nature of these items under basic concepts of total income?

Lottery winnings are taxed at a flat special rate of 30% and cannot be reduced by any deduction, expenditure or loss. So Anita's long-term capital loss cannot be set off against the Rs 1,00,000 win, and the win is not taxed at slab rates or exempt.

  1. ALottery winnings are taxed along with normal income at slab rates
  2. BLottery winnings are taxed at a special flat rate and cannot be reduced by any loss or deductionCorrect
  3. CLong-term capital loss can be set off against the lottery winnings
  4. DLottery winnings are exempt because they are casual in nature

Explanation

Winnings from lotteries are taxed at a flat special rate of 30% and are not reduced by any expenditure, allowance or loss, nor can they be set off against any loss. Hence the capital loss cannot reduce the lottery winnings. Taxing them at slab rates or treating them as exempt is wrong because casual income is specifically chargeable under Income from other sources at the special rate.

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