Introduction: The Government of India, under the Ministry of Finance, has recently responded to pertinent questions in the Lok Sabha regarding tax evasion, particularly focusing on the evasion of TDS. The queries address concerns related to the disbursement of lottery prizes, potential amendments to tax laws, and actions taken against lottery distributors involved in GST evasion.
Detailed Analysis:
1. Disbursement of Lottery Prizes through Banking Channels: The Ministry of Finance, in response to a request from the Ministry of Home Affairs (MHA), is considering the option of making all prize payments through formal banking channels. This move is viewed as a strategic step to mitigate risks associated with money laundering, terrorist financing, and proliferation funding. The robust banking system and effective regulation/supervision of entities contribute to enhancing financial integrity.
2. Amendment to Section 194B and Taxation of Lottery Winnings: The government is contemplating an amendment to Section 194B of the Income-tax Act, 1961, to include lotteries. The proposed amendment aims to make each prize winning taxable, thereby curbing tax evasion and money laundering in the paper lottery business. As per the Finance Act 2023, the applicable tax rate is 30%, covering winnings in cash or kind. Section 115BB of the Act ensures that no deductions are allowed on such winnings.
3. Government Action Against Tax Evasion by Lottery Distributors: The Income Tax Department, in line with the provisions of Direct Tax Laws, takes decisive action upon receiving credible information or intelligence about tax evasion. This includes conducting thorough enquiries, implementing search and seizure or survey actions, and carrying out assessments as per the Act. Notably, twelve cases of GST evasion amounting to Rs. 344.57 Crore have been detected against lottery distributors. The government has successfully recovered Rs. 621.56 Crore, inclusive of interest and penalty, from July 2017 to November 2023.
Conclusion: The Ministry of Finance’s responses underscore the government’s commitment to combat tax evasion and promote financial transparency. Considering disbursement of lottery prizes through formal banking channels and potential amendments to tax laws demonstrate proactive steps. The robust actions against lottery distributors involved in GST evasion further reinforce the government’s dedication to ensuring compliance with tax regulations and safeguarding the nation’s financial interests. Stay informed about these updates as the government continues to take stringent measures against tax evasion.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF FINANCIAL SERVICES
LOK SABHA
UNSTARRED QUESTION NO. 1196
Answered on the December 11, 2023/Agrahayana 20, 1945 (Saka)
Evasion of TDS
1196. SHRI UNMESH BHAIYYASAHEB PATIL:
(a) whether the Ministry of Finance is likely to consider the request of the Ministry of Home Affairs to make payment of all prizes through banking channels and if so, the details thereof;
(b) whether the Government intends to consider to amend section 194B to include lottery as well whereby each and every prize winning shall be taxable to stop the tax evasion and money laundering in paper lottery business and if so, the details thereof; and
(c) the action taken/being taken by the Government against lottery distributors who indulged in evasion of GST, TDS etc.?
ANSWER
THE MINISTER OF STATE FOR FINANCE
(DR. BHAGWAT KARAD)
(a): A reference was received from Ministry of Home Affairs (MHA) for comments regarding disbursement of prize amount of lotteries through formal banking channel. Comments in this regard has been sent to MHA. Using formal banking channel for any kind of transaction, including disbursement of lottery prize, is helpful in mitigating the associated money laundering/terrorist financing / proliferation funding risks in view of the robust banking system and effective regulation/supervision of the regulated entities.
(b) and (c): As per Section 194B of the Income-tax Act, 1961 (“the Act’) the person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, being the amount or the aggregate of amounts exceeding ten thousand rupees during the financial year shall, at the time of payment, deduct income-tax at the rates in force. Vide Finance Act 2023, the rate in force is 30%. This also includes winnings in kind or partly in cash and partly in kind. It is substantively charged to tax at the rate of 30% under section 115BB of the Act and no deduction on the winnings is allowed.
The Income Tax Department takes appropriate action in cases involving evasion of tax whenever any credible information/intelligence of violation of provisions of Direct Tax Laws relating to any taxpayer comes to its notice. Such action under Direct Tax laws includes conducting enquiries, mounting search and seizure or survey action, assessment and consequential actions thereto, wherever applicable as per the provisions of the Act. Twelve cases involving GST evasion of Rs. 344.57 Crore have been detected against lottery distributors and Rs. 621.56 Crore (including interest and penalty) has been recovered/ realized from July, 2017 to till November 2023.
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