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CA Intermediate · Taxation · Income from Other Sources

Arjun, a resident individual, won ₹5,00,000 in a lottery in tax year 2026-27. He had spent ₹20,000 on buying lottery tickets, and tax at the applicable rate was deducted at source from the prize. He also earned ₹12,000 as interest on his savings bank account. What is the amount chargeable to tax under the head income from other sources, before any Chapter VI-A type deduction?

The chargeable amount is ₹5,12,000. Lottery winnings are taxable at the full gross amount and no expense, including ticket cost, is allowed. Tax deducted at source is merely a credit against tax payable, not a reduction of income. The bank interest of ₹12,000 is added to the prize.

  1. A₹5,12,000Correct
  2. B₹4,92,000
  3. C₹3,62,000
  4. D₹5,00,000

Explanation

Lottery winnings are taxed on the gross amount and no expenditure, such as the cost of tickets, can be deducted. The tax deducted at source is only a credit against tax and does not reduce income. So income is ₹5,00,000 plus the interest of ₹12,000, which is ₹5,12,000. The option of ₹3,62,000 wrongly subtracts the tax deducted from income.

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