1) Who is responsible to deduct tax u/s 194G?

Any person responsible for paying any income by way of commission, remuneration or prize (by whatever name called) on stocking, distributing, purchasing or selling lottery tickets, shall be responsible to deduct tax at source.

 2) When to Deduct TDS under Section 194G?

Tax shall be deducted under this section, either at the time of credit to the account of the payee or at the time of payment thereof, whichever is earlier.

For this purpose, credit to “Suspense account” or any other name shall be deemed to be a credit of such income to the account of the payee.

For this purpose, “payment” can be in cash or by issue of a cheque or draft or by any other mode.

TDS on Commission on Sale of Lottery Tickets- Analysis

3) Rate of TDS under Section 194G

The rate of tax deduction u/s 194G is 5%(3.75% w.e.f. 14.05.2020 to 31.03.2021)

  • No surcharge and Health & Education Cess shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.
  • The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.

 4) Threshold limit

Tax is required to be deducted under this section only if payment is exceeding ₹ 15,000.

5) Where TDS under Section 194G is either Not to be Deducted or to be Deducted at Lower Rate [Section 197]

The assessee case make an application in Form No. 13 to the Assessing Officer and obtain from him such certificate as may be appropriate authorising the payer to deduct tax at nil rate or at lower rate.

As per section 206AA(4), no certificate under section 197 for deduction of tax at Nil rate or lower rate shall be granted unless the application made under that section contains the Permanent Account Number (PAN) of the applicant.

***

Extract of Section 194G of Income Tax Act, 1961

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 fifteen thousand rupees 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 the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of five per cent.

(2)  [***]

(3)  [***]

Explanation.—For the purposes of this section, where any income 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 provisions of this section shall apply accordingly.

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