Applicability of tax

[Ashutosh Chhawchharia]

In case of Tax Computation of Women, if her total income is Rs.230000/- out of which Rs.100000/- is against Income from Horse Race, whether tax will be calculated after considering the basic exemption limit of Rs.180000/- or at flat rate of 30% on Income from Horse Race and balance as per basic exemption slab?

[DEV KUMAR KOTHARI]

Please come for discussion with complete home work first. Read and provide your own feed back with relevant provisions S. 2(24)(ix),56 (2)(ib) ,115BB, 74A, Wxpl. 3, 74A, 194BB and definition of income etc. and relevant circulars and decisions if any. So that purpose of discussion is achieved. I hope you would say taht if I do so much then why to come to discussion froum. This column is discussion forum, for spreading knowledge, and for discussions to update and have different possible idesa.

[Rama Krishana]

It is intersting that Mr. Dev Kumar kothari has given the reply to this query in a different manner. If you go to the provisions of section 115BB you would find that income tax is levied at 30% on straight on the whole income from winning from horse race. You are not entitled for basic exemption. Even if the winning from horse race is the only part of whole income, you have to pay tax at 30% on the whole income. Therefore, on teh part of Rs. 1,00,000/- you need to pay tax at 30% and for the balance of Rs. 1,30,000/- will be treated as normal income below Rs. 1,80,000/- no tax = total tax is Rs. 30,000/- plus cess.

[Rama Krishana]

To understand more and to remove confusion you may read the Section 115BB and Section 112 together and you would find the answer.

[DEV KUMAR KOTHARI]

Mr.Rama Krishna is correct. There is no basic exemption for incomes referred to in S. 115BB. Tax @ 30% is applicable from 01.04.2002 earlier it was @ 40%. The section 115BB is in Chapter XII and is a special provision for special treatment and rate of tax. There is no specific scope for adjustment against unused basic exemption as is provided in case of some type of STCG and LTCG u/s 111A and 112. This provision was introduced because earlier some people were suspected to use the device of showing horse race gains as income under basic exemption and race course used to show it as expenditure in their business of running and maintaining horse races so there was double impact on revenue. In case of Sumati Dayal such suspecion was accepted by the supreme Court on ground of human probabilities and additin as income from undisclosed sources was held valid.

AI Summary

Taxation of horse race winnings: taxed at flat rate without basic exemption; other income taxed under normal slabs.
Winnings from horse races are subject to a special flat rate of tax and are not eligible for the basic exemption; such winnings are taxed separately at the specified flat rate while the taxpayer's other income is assessed under ordinary tax slabs.