Casual Income, Family Pension

Casual income

Casual income means income in the nature of winning from lotteries, crossword puzzles, races including horse races, card games and other games of any sort, gambling, betting etc. Such winnings are chargeable to tax at a flat rate of 30% under section 115BB.

Conditions:

1. No expenditure or allowance can be allowed from such income.
2. Deduction under Chapter VI-A is not allowable from such income.
3. Adjustment of unexhausted basic exemption limit is also not permitted against such income.

In order to prevent the practice of receiving sum of money or the property without consideration or for inadequate consideration, section 56(2)(x) brings to tax any sum of money or the value of any property received by any person without consideration or the value of any property received for inadequate consideration.

Sum of Money: If any sum of money is received without consideration, and the aggregate value of which exceeds ₹ 50,000, the whole of the aggregate value of such sum is chargeable to tax.

Immovable property:

I. If an immovable property is received

1. Without consideration, the stamp duty value of such property would be taxed as the income of the recipient if it exceeds ₹ 50,000.
2. For a consideration, which is less than the stamp duty value of the property by an amount exceeding ₹ 50,000, the difference between the stamp duty value and the consideration shall be chargeable to tax in the hands of the assessee as “Income from other sources”.
3. Value of property to be considered where the date of agreement is different from date of registration: Taking into consideration the possible time gap between the date of agreement and the date of registration, the stamp duty value may be taken as on the date of agreement instead of the date of registration, if the date of the agreement fixing the amount of consideration for the transfer of the immovable property and the date of registration are not the same, provided whole or part of the consideration has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system (ECS) through a bank account on or before the date of agreement.
4. If the stamp duty value of immovable property is disputed by the assessee, the Assessing Officer may refer the valuation of such property to a Valuation Officer. In such a case, the provisions of section 50C and section 155(15) shall, as far as may be, apply for determining the value of such property.

As per section 50C, if such value is less than the stamp duty value, the same would be taken for determining the value of such property, for computation of income under this head in the hands of the buyer.

Movable Property:

If the movable property is received

1. Without consideration, the aggregate fair market value of such property on the date of receipt would be taxed as the income of the recipient, if it exceeds ₹ 50,000.
2. For a consideration which is less than the fair market value of the property by an amount exceeding ₹ 50,000, and the difference between the aggregate fair market value and such consideration exceeds ₹ 50,000, such difference would be taxed as the income of the recipient.

Applicability of section 56(2)(x):

The provisions of section 56(2)(x) would apply only to property which is the nature of a capital asset of the recipient and not stock-in-trade, raw material or consumable stores of any business of the recipient.

Non-applicability of section 56(2)(x):

However, any sum of money or value of property received in the following circumstances would be outside the ambit of section 56(2)(x):

1. From any relative; or
2. On the occasion of marriage; or
3. Under a will or by way of inheritance; or
4. In contemplation of deathof the payer or donor, as the case may be; or
5. From any local authorityas defined in the Explanation to section 10(20); or
6. From any fund or foundation or university or other educational institution or hospital, etc. referred to in section 10(23C); or
7. From any trust or institution registered under section 12AA; or
8. By any fund or trust or institution or any university or other educational institution or any hospital, etc. referred to in Section 10(23C)(iv)/(v)/(vi)/(via).
9. By way of the transaction not regarded as a transfer under section 47.
10. From an individual by a trust created or established solely for the benefit of a relative of the individual.

Relative includes:

1. In case of an individual:
2. spouse of the individual;
3. brother or sister of the individual;
4. brother or sister of the spouse of the individual;
5. brother or sister of either of the parents of the individual;
6. any lineal ascendant or descendant of the individual;
7. any lineal ascendant or descendant of the spouse of the individual;
8. Spouse of any of the persons referred to above.

Family Pension

Pension received by a family member is taxed under income from other sources in family member’s income tax return. If this pension is commuted or is a lump sum payment, it is not taxable. Uncommuted pension received by a family member is exempt to a certain extent. Rs 15,000 or 1/3rd of the uncommuted pension received whichever is less is exempt from tax.

Pension that is received from UNO

Pensions that are received from UNO by its employees or their family is exempt from tax. Pension received by family members of armed forces is also exempt.

• If a family member receives a pension of Rs 2,00,000, the exemption available is least of – Rs 15,000 or Rs 66,667 (1/3rd of Rs 2,00,000). Thus, the taxable family pension will be Rs 2,00,000 – Rs 15,000 = Rs 1,85,000