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.
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)
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Author Bio
if a person wins in draw of lots two times in a financial year, eg: Rs.5000 once and another Rs.10000, then how TDS need to be deducted : on Rs.15000 or Rs.10000/-