Instructions for deduction of tax at source from winnings from lottery or crossword puzzle during financial year 1977-78 at the rates specified in Part II of First Schedule to Finance (No. 2) Bill, 1977
1. I am directed to invite a reference to this Department’s Circular No. 217 [F. No. 275/19/77-IT(B)], dated 31-3-1977 [Clarification 2] on the above subject. Under section 194B, every person responsible for paying to any person, whether resident or non-resident any income by way of winnings from any lottery or crossword puzzle in an amount exceeding Rs. 1,000 is required to deduct income-tax thereon at rates specified in this behalf in the Finance Act of the relevant year. The rates of the deduction of income-tax at source for the financial year 1977-78 have been specified in Part II of the First Schedule to the Finance (No. 2) Bill, 1979 and are as follows :
Rates of income-tax including surcharge
I. In the case of a person other than a company :—
(a) where the person is resident in India
34.5 per cent (IT 30 per cent + SC 4.5 per cent);
(b) where the person is not resident in India
34.5 per cent (IT 30 per cent + SC 4.5 per cent);
income-tax and surcharge on income-tax at the rates prescribed in Sub-Paragraph I of Paragraph A of Part III of the First Schedule to the Finance (No. 2) Bill, 1977, if the winnings from lottery or crossword puzzle had been the total income,
whichever is higher.
II. In the case of a company—
(a) where the company is a domestic company
23 per cent (IT 22 per cent + SC 1 per cent);
(b) where the company is not a domestic company
73.5 per cent (IT 70 per cent + SC 3.5 per cent).
2. It is requested that deduction of tax from winnings from lotteries and crossword puzzles may be made during the financial year 1977-78, on payments made on or after June 17, 1977, according to the above rates. In case any changes in rates proposed in the Finance (No. 2) Bill, 1977 are made by the Parliament, suitable instructions will be sent to you.
3. The substance of the main provisions in the law insofar as they relate to deduction of income-tax at source from winnings from lotteries and crossword puzzles is given hereunder :
(1) No tax will be deducted at source where the income by way of winnings from lottery or crossword puzzle is Rs. 1,000 or less.
(2) Where the prize is given partly in cash and partly in kind, income-tax will be deductible from the cash prize with reference to the aggregate amount of the cash prize and the value of the prize in kind. Where, however, the prize is given only in kind no income-tax will be required to be deducted.
(3) Income-tax will be deductible at the aforesaid rates during the financial year 1977-78, from prizes given after March 31, 1977, even if the relevant draw in respect of lottery or, as the case may be, the competition in respect of a crossword puzzle may have been held on or before that date.
(4) Where the lottery or crossword puzzle is paid in instalments, the deduction will be made at the time of actual payment of each instalment.
(5) Income-tax will be deductible from the amount of the prize money paid to the owner of the lucky ticket with reference to the amount paid to him. Income-tax is not deductible from the income by way of bonus or commission paid to lottery agents or sellers of lottery tickets on the sales made by them.
(6) In view of section 288B, the amount of tax to be deducted at source should be rounded off to the nearest rupee by ignoring amounts less than fifty paise and increasing amounts of fifty paise or more to one rupee.
(7) Tax deducted on behalf of the Government should be paid to the credit of the Central Government on the same day by book adjustment. In other cases, the tax deducted should be paid to the credit of the Central Government within one week from the date of deduction. The challans for paying income-tax in the Government account may be obtained from the Income-tax Officer concerned.
(8) The relevant forms in relation to the provisions for deduction of income-tax at source from winnings from lotteries and crossword puzzle prizes are prescribed by the Income-tax Rules. In this connection, the following instructions may please be noted :
(i) In the case of any person, other than a company, it is open to the recipient of the prize to make an application in Form No. 13B to the Income-tax Officer concerned and obtain from him a certificate authorising the payer to deduct tax at such lower rates or deduct no tax as may be appropriate to his case. Such a certificate will be valid for the period specified therein unless it is cancelled by the Income-tax Officer earlier.
(ii) The persons responsible for making any payment by way of winnings from lotteries or crossword puzzles should issue a certificate in Form No. 19B showing therein the amount of the prize, the amount of tax deducted at source and the date of payment in the Government account.
(iii) The person making deduction of tax in accordance with section 194B from income by way of winnings from lotteries or crossword puzzles should sent to the Income-tax Officer having jurisdiction to assess him the statement in Form No. 26B quarterly on July 15, October 15, January 15 and April 15 in respect of deductions made by him during the immediately preceding quarter.
Circular : No. 226 [F. No. 275/19/77-IT(B)], dated 14-7-1977