Instructions for deduction of tax at source from winnings from lottery or crossword puzzle or horse race during financial year 1986-87 at the rates specified in Part II of First Schedule to Finance Act, 1986
1. I am directed to invite a reference to this Department’s Circular No. 428 [F. No. 275/30/85-IT(B)], dated 8-8-1985 and Circular No. 425 [F. No. 275/31/85-IT(B)], dated 24-7-1985 on the above subject, wherein the rates at which deductions of tax under sections 194B and 194BB to be made during the financial year 1985-86 from winnings from lottery or crossword puzzles or horse races were communicated.
2. According to the provisions of section 194B, every person responsible for paying to any person, whether resident or non-resident, any income by way of winnings from lottery or crossword puzzles in any amount exceeding Rs. 1,000, is required to deduct income-tax thereon at the rates specified in this behalf in the Finance Act of the relevant year. According to the provisions of section 194BB, any person, being a book-maker or a person to whom licence has been granted by the Government under any law for the time being in force for horse racing in any race course, or for arranging for wagering or betting in any race course, who is responsible for paying to any person any income by way of winnings from horse races in any amount exceeding Rs. 2,500, is required to deduct income-tax thereon at the rates specified in this behalf in the Finance Act of the relevant year. The Finance Act, 1986 has raised limits specified under sections 194B and 194BB to Rs. 5,000 under the aforesaid sections with effect from 1-6-1986.
The rates of deduction of tax at source under sections 194B and 194BB during the financial year 1986-87 as specified in Part II of the First Schedule to the Finance Act, 1986 are as under :
Rates of income-tax
(i) In the case of a person other than a company :
(a) where the person is resident in India
40 per cent;
(b) where the person is not resident in the amount of the income;
income-tax at 30 per cent of India
or
income-tax in respect of income at the rates specified in Sub-Paragraph I of Paragraph A of Part III of the First Schedule to the Finance Act, 1986 [Annex I], if such income had been the total income,
whichever is higher.
(ii) In the case of a company :
(a) where the company is a domestic company
21.5 per cent;
(b) where the company is not a domestic company
65 per cent.
3. The Finance Act, 1986 has inserted a new section 115BB in the Income-tax Act to provide the gross winnings from lotteries, crossword puzzles, races including horse races (other than income from the activity of owning and maintaining race horses), card games and other games of any sort or from gambling or betting of any nature whatsoever shall be chargeable to income-tax at a flat rate of 40 per cent on the gross winnings.
4. The substance of the main provisions in the law in so far as they relate to deduction of income-tax at source from winnings from lotteries or crossword puzzles or horse races is available in the aforesaid circulars. These instructions are not exhaustive and are issued only with a view to helping the persons responsible for making deduction of tax at source under these sections. Wherever there is difference of opinion, a reference should always be made to the provisions of the Act, and the relevant Finance Act through which the changes in law are made. In case any assistance is required, the Income-tax Officer concerned or the local Public Relation Officers of the Income-tax Department may be approached for the same, who will, if necessary, obtain orders of the higher authorities in the matter.
Circular : No. 467 [F.No. 275/69/86-IT(B)], dated 21-8-1986.
