Circular No. 631-Income tax dated 20-8-1992

Instructions for deduction of tax at source from winnings from lotteries or crossword puzzles, horse races or from commission, etc. – Rates of tax applicable during financial year 1992-93

1. Reference is invited to the Board’s Circular No. 616, dated 22-11-1991 on the above mentioned subject wherein the rates at which the deduction of tax under sections 194B, 194BB and 194G of the Income-tax Act, 1961 was to be made during the financial year 1991-92, from winnings from lotteries, crossword puzzles, horse races and from commission, etc., paid on sale of lottery tickets, were communicated.
2. There is no change in the rates of tax which will be applica­ble during the financial year 1992-93 in the matter of deduction of tax at source under sections 194B, 194BB and 194G of the Income-tax Act. The salient provisions relating to deduction of tax at source under the aforesaid sections are as follows :

(i)   As per section 194B, the persons responsible for paying to any person any income by way of winnings from lotteries or crossword puzzles, in an amount exceeding Rs. 5,000 (Rupees five thousand only) shall, at the time of payment thereof, deduct income-tax thereon at the rate in force. For the financial year 1992-93, the rate at which tax is to be deducted is 40% (plus surcharge referred in para 3).

(ii)   As per section 194BB any person, being a book-maker or a person to whom a 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 any horse race in an amount exceed­ing Rs. 2,500 (Rupees two thousand and five hundred only) shall, at the time of payment thereof, deduct income-tax thereon at the rates in force, viz., 40% (plus surcharge referred in para 3).

(iii)   As per section 194G(1), any person who is respon­sible for paying, on or after the 1st day of October, 1991, to any person who is or has been stocking, distributing, purchasing or selling lottery tickets, any income by way of commission, remuneration or prize (by whatever name called), on such tickets in an amount exceeding Rs. 1,000 (Rupees one thousand only), shall at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by issue of a cheque or a draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 10% (plus surcharge referred in para 3). It is clarified in this regard that where any such income, e.g., commission, remuneration, etc., is credited to any account, whether called “Suspense Account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the tax thereon will have to be deducted at source.

3. The amount of income-tax to be deducted at the aforesaid rates shall be further increased by a surcharge, for the purposes of the Union, at the following rates :

(i)   In a case where the payee is a non-corporate resident person                                                                                         12%

(ii)   In a case where the payee is a domestic company                                                                                                            15%.

4. The responsibilities, obligations, etc., under the Income-tax Act, of the persons deducting tax at source are as follows :

(a)   According to the provisions of section 200, any person deducting any sum in accordance with the provisions of sections 194B, 194BB and 194G, etc., shall pay, within the prescribed time, the sum so deducted, to the credit of the Central Govern­ment. Reference in this regard is invited to rule 30 of the Income-tax Rules, 1962 which prescribes the time for payment of tax into the Government’s account. Normally, the tax is required to be deposited within one week from the date of deduction of tax. Where, however, deduction is made by or on behalf of the Government, the sum has to be credited to the Central Government on the day of the deduction itself. If a person fails to deduct tax at source, or, after deducting, fails to pay the tax to the credit of the Central Government, he shall be liable to pay simple interest at fifteen per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid into the Government account. Reference in this regard is also invited to section 271C, according to which, a person who fails to deduct the whole or any part of the tax as required under the provisions of Chap­ter XVII of the Act, shall pay, by way of penalty, a sum equal to the amount of tax not deducted by him. Further, section 276B lays down that if a person fails to pay to the credit of the Central Government, the tax deducted at source by him, he shall be pun­ishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to seven years, and with fine.

(b)   According to the provisions of section 203, every person responsible for deducting tax at source is required to furnish a certificate to the effect that the tax has been deduct­ed and, to specify therein, the amount deducted and certain other prescribed particulars. The certificate has to be furnished within the prescribed period (as given in rule 31 of the I.T. Rules, generally, within one month and fourteen days of the date of payment/credit) to the person to whose account credit is given or to whom payment is made or, to whom the cheque or warrant is issued, as the case may be. The certificate for tax deduction under section 194G has to be issued in Form No. 16A (copy en­closed at Annexure I) on tax deductor’s own stationery. In case of deduction under sections 194B and 194BB however, the certifi­cate is required to be furnished in Form 16B, printed by the Central Government (which is to be obtained from the concerned Commissioner of Income-tax by making a nominal payment). If a person fails to furnish the certificate of tax deduction he shall be liable to pay, by way of penalty, under section 272A, a sum which shall not be less than Rs. 100, but which may extend to Rs. 200 for each day during which the failure continues.

(c)   According to the provisions of section 203A, it is obligatory for all persons responsible for deducting tax at source to obtain a Tax deduction Account Number (TAN) and quote the same in the challans, TDS certificates, returns, etc. De­tailed instructions in this regard are available in this Depart­ment’s Circular No. 497, dated 9-10-1987. If a person fails to comply with the provisions of section 203A, he shall pay, by way of penalty, under section 272BB, a sum which may extend to Rs. 5,000.

(d)   According to the provisions of section 206, read with rules 36A and 37 of the Income-tax Rules, the prescribed persons in the case of every office of  Government, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or associ­ation, every private employer and every other person responsible for deducting tax under the provisions of Chapter XVII of the Income-tax Act (which includes sections 194B, 194BB and 194G) shall, within the prescribed time, after the end of each finan­cial year, prepare and deliver or cause to be delivered to the designated/concerned Assessing Officer, a return of deduction of tax under sections 194B, 194BB and 194G. The returns for tax deduction under sections 194B and 194BB have to be filed by 31st May following the financial year in which tax deduction is made. These returns have to be filed in the prescribed forms (Nos. 26B and 26BB, respectively). For deduction under section 194G, the return has to be filed in form No. 26H by the 30th June, follow­ing the financial year in which the deduction is made. If a person fails to furnish in due time the annual return, he shall be liable to pay by way of penalty,  under section 272A, a sum which will not be less than Rs. 100 per day, and, not more than Rs. 200 per day, for each day during which the default continues; so, however, that this amount shall not exceed the amount of tax which was deductible at source.

5. It may be added that the Finance Act, 1992 has inserted sub-sections (2) and (3) in section 194G with effect from 1-6-1992 in order to obviate the hardship in the case of persons, engaged in the lottery business, whose total income bears no tax liability or bears a tax liability justifying deduction of tax at source at a rate lower than 10%. Such person can make an application in this behalf to the Assessing Officer, who will, after satisfying himself of the correctness of the facts and circumstances of the case, give to him such certificate as may be appropriate. On the basis of this certificate, the persons responsible for paying the income by way of commission, remuneration or prize (by whatever name called) shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be.
6. These instructions have been issued with a view to helping the persons responsible for making deduction of tax at source under sections 194B, 194BB and 194G. However, if there is any doubt, a reference may be made to the provisions of the Income-tax Act, 1961, the Income-tax Rules, 1962 and the Finance Act, 1992. In case any assistance is required, the Assessing Officer concerned, or, the Local Public Relations Officer of the Income-tax Depart­ment may be approached.

Circular : No. 631, dated 20-8-1992.

ANNEXURE I

FORM NO. 16A

[See rule 31(1)(b)]

Certificate of deduction of tax at source under section 203 of
the Income-tax Act, 1961

For interest on securities; dividends; interest on time deposit­s referred to in clauses (vii) and (viia) of sub-section (3) of section 194A; insurance commission; payments in respect of depos­its under National Savings Scheme; payments on account of repur­chase of units by the Mutual Fund or Unit Trust of India; commis­sion, remuneration or prize on sale of lottery tickets; commis­sion or brokerage; income from units referred to in section 196B

DETAILS OF PAYMENT, TAX DEDUCTION AND DEPOSIT OF TAX INTO CENTRAL GOVERNMENT ACCOUNT

Certified that a sum of Rs. (in words)……………………..has been deducted at source and paid to the credit of the Central Government as per details given above.