Circular No. 85-Income Tax dated 29-5-1972

1757. Instructions for deduction of tax at source from winnings from lottery or crossword puzzle during financial year 1972-73 at the rates specified in Part II of First Schedule to Finance Act, 1972

1. The Finance Act, 1972 has made several modifications in the scheme of tax exemption of casual and non-recurring receipts. The effect of these modifications will, inter alia be that winnings from lotteries and crossword puzzles will become chargeable to income-tax from the assessment year 1973-74 onwards. Under a provision made in the new section 194B every person responsible for paying any income by way of winnings from any lottery or crossword puzzle in an amount exceeding Rs. 1,000 will be re­quired to deduct income-tax thereon at the rates prescribed in this behalf in the Finance Act of the relevant year. These provisions will apply in the case of resident as well as non-resident taxpayers. The rates for deduction of tax at source for the financial year 1972-73 have been prescribed in Part II of the First Schedule to the Finance Act, 1972, and are as follows :

Rates of income-tax including surcharge

2. 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 prize is Rs. 1,000 or less or where the payment is made before June 1, 1972.

(2) Where the prize is given partly in cash and partly in kind, income-tax will be deductible from the cash prizes 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 from prizes given after May 31, 1972, even if the relevant draw in respect of a 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 prize is paid in instalments, the deduction will be made at the time of actual payment of each instalment.

3. The relevant forms, etc. in relation to the provisions for deduction of income-tax at source from lottery and crossword puzzle prizes are being prescribed by the Income-tax Rules. In this connection, the following instructions may be noted:

(1) In the case of any person, other than a company, it will be open to the recipient of the prize to make an application 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.

(2) In view of the existing provision in section 288B, the amount of tax to be deducted at source should be rounded off to the nearest rupee by ignoring amounts less than 50 paise and increas­ing the amounts of 50 paise or more to one rupee.

(3) The tax deducted on behalf of 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 month of the last day of the month in which the deduction is made. The challans for paying tax in the Government account may be obtained from the Income-tax Officer concerned.

(4) The person responsible for making any payment by way of winnings from lotteries or crossword puzzles should issue a certificate showing therein the amount of the prize, the amount of tax deducted at source and the date of payment in the Govern­ment account. Necessary forms in this regard are being prescribed under the Income-tax Rules [see Form 19B].

4. Further instructions will be communicated after the relevant forms, etc., are prescribed under the Rules.

Circular : No. 85 [F. No. 275/9/72-ITJ], dated 29-5-1972