1) Who is responsible to deduct tax under section 194B of Income Tax Act, 1961?

The person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle, card game and other game of any sort in an amount exceeding ₹ 10,000 shall, deduct income-tax thereon at the rates in force.

Therefore, no tax is to be deducted where the amount of winning from each lottery, crossword puzzle, card game, etc. does not exceed ₹ 10,000.

Provided that If the winning is wholly in kind or it is partly in kind & partly in cash and the cash balance is not sufficient enough to meet the TDS liabilities, then Payer shall release the prize only if either-

1. He has collected the amount equivalent to TDS amount from the payee.

2. He insists the payee to make the payment of TDS on his own & submit the proof to the payer.

TDS on winnings from Lottery, Game Shows, and Puzzle etc

2) When to Deduct TDS from winning from Lottery, Card Games etc. u/s 194B?

– At the time of payment of such income.

– Where lottery or prize money, etc. is paid in installments, the deduction of tax is to be made at the time of actual payment of each such installment.

– No Deduction/Expenditure is allowed from such Income.

– No deduction under section 80C or 80D or any other deduction/allowance is allowed from such income.

3) Rate of TDS under Section 194B

Rate of TDS is 30%.

No surcharge and Health & Education Cess shall be added. Hence, TDS shall be deductible at basic rates.

ILLUSTRATION

A T.V. channel pays ₹ 8 lakh as prize money to the winner of a quiz programme, “Kaun banega Crorepati”? Whether T.V. channel is responsible to deduct tax at source on the prize money so distributed?

The prize money so distributed falls within the meaning of “winning from any card game and other game of any sort” and therefore, under section 194B, the person responsible for paying the same, shall at the time of payment; deduct tax at 30% provided prize money exceeds ₹ 10,000.

Considering the above, T.V. channel is responsible to deduct tax at source on the prize money so distributed under section 194B of the Act.

4) No TDS on Bonus or Commission payable to Lottery Agents

If out of winning amount of lottery, etc., any bonus or commission is paid/payable to lottery agents or sellers of lottery tickets, or sales made by them, no income tax is to be deducted for that amount paid and tax will therefore be deducted after deducting such bonus and commission.

Example

 Mr. M wins a lottery price of ₹ 1,10,000. A sum of ₹ 6,000 is deducted for payment to the lottery agent. Tax will be deducted on ₹ 1,04,000 after allowing bonus/ commission paid to agent.

5) Points to be noted:

  • If prize is given partly in cash and partly in kind then tax on whole prize (i.e. aggregate of cash and value of prize in kind) shall be deducted from the cash prize.
  • If prize is given in kind only (or cash prize is not sufficient), then payer should ensure that tax has been paid on such income before releasing such prize.
  • Where a certain percentage has to be forgone either in favour of Government or an agency conducting lotteries, then such portion is not subject to deduction of tax at source.
  • Where an agent receives the prize money on unsold ticket or becomes entitled to an unclaimed prize, it shall form part of his business income and therefore not liable for tax deduction u/s 194B
  • If prize money is paid in installments, then tax shall be deducted at the time of payment of each installment.
  • Tax shall be deducted on payment of commission, etc. to the lottery agent u/s 194G and not u/s 194B.

Extract of Section 194B TDS on winnings from Lottery, Game Shows, and Puzzle etc

194B. 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 in an amount exceeding ten thousand rupees shall, at the time of payment thereof, deduct income-tax thereon at the rates in force :

Provided that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings.

(Republished with amendments)

Read Also:-

SECTION TAXGURU LINKS
192 Section 192 TDS on Salary- Analysis
192A Section 192A | TDS on Payment of Accumulated balance due to an Employee
193 Section 193 TDS from Interest on Securities – Analysis
194 Section 194 TDS on payment of dividend
194A Section 194A TDS on Interest (other than Interest on Securities)
194B Section 194B TDS on winnings from Lottery, Game Shows & Puzzle etc
194BB Section 194BB TDS on Winning from Horse Races
194C Section 194C TDS on Payment to Contractor
194D Section 194D TDS on Insurance Commission- Analysis
194DA Section 194DA TDS on Payment in respect of Life Insurance Policy
194E Section 194E TDS on Payments to Non-Resident Sportsmen or Sports Association
194EE Section 194EE TDS on Payments in respect of Deposit under NSS
194F Section 194F TDS on Payments on account of repurchase of units by Mutual Fund or UTI
194G Section 194G TDS on Commission on Sale of Lottery Tickets- Analysis
194H Section 194H TDS on Commission & Brokerage- Analysis
194I Section 194I TDS on Rent – Analysis
194-IA Section 194IA TDS on Purchase of Immovable Property
194-IB Section 194IB TDS on Rent of Property
194-IC Section 194IC TDS on Payment Made Under Specified Agreement
194J Section 194J TDS on Professional or Technical Fees
194K Section 194K TDS on Income In Respect of Units of Mutual Fund
194-LA Section 194LA TDS on Payments of Compensation on Acquisition of certain Immovable Property
194-LB Section 194LB TDS on Income by way of Interest from Infrastructure Debt Fund 
194-LBA Section 194LBA TDS on Certain Income from Units of a Business Trust
194-LBB Section 194LBB TDS on Income in Respect of Units of Investment Fund
194-LBC Section 194LBC TDS on Income in Respect of Investment in Securitization Trust
194-LC Section 194LC | TDS on Interest Income from Indian Company or Business trust
194-LD Section 194LD TDS on Interest Income on certain Bonds/Government Securities
194M Section 194M TDS on payments of certain Sums by Individual & HUF
194N Section 194N TDS on cash withdrawal from banks/post offices
194O Section 194O TDS on E-commerce Operator- Analysis
194P Section 194P Deduction of tax in case of specified senior citizen
194Q Section 194Q Deduction of tax at source on payment of certain sum for purchase of goods
195 Section 195 TDS on Non-Resident Payments
195A Section 195A Income Payable ‘Net of Tax’
196B Section 196B TDS on long term capital gains from units referred to in section 115AB
196C Section 196C TDS on Income from foreign currency bonds or GDRs
196D Section 196D TDS on Income of foreign institutional investors from securities
197 Section 197 Certificate For TDS Deduction at Lower Rate
197A Section 197A – No TDS Deduction – Form 15G & Form 15H
198 Section 198 Tax Deducted at Source shall be deemed to be income received
200 (1) & (2) Section 200(1) & (2) Time Limit for Deposit of Tax Deducted at Source
200 (3) Section 200(3) Forms & Time Limit for Submitting Quarterly TDS Returns
203 Section 203 TDS Certificate
200A Section 200A Processing of Statements of Tax Deducted at Source
201 Section 201 Consequences of Non-Compliance to TDS
203A Section 203A Tax Deduction And Collection Account Number
206AA Section 206AA Mandatory Requirement of Furnishing PAN-TDS
206AB &
206CCA
Section 206AB & 206CCA Higher Rate of TDS/TCS in Case of Non-Filers of Return
206C Section 206C Tax Collection at Source (TCS)
206CC Section 206CC Mandatory Requirement of Furnishing PAN
40(a)(i) Disallowance for Non deduction of Tax at Source

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