The present article tries to explain the readers the provisions covered under section 194G of the Income Tax Act, 1961 relating to TDS on commission on purchase / distribution / sale and other activities of lottery tickets.
Basic provisions governing section 194G
Section 194G requires the person, who is paying any income by way of commission / remuneration / prize on lottery tickets to the person who has been stocking / distributing / purchasing / selling the lottery tickets, to deduct TDS.
Time of deduction of TDS
In case the Deductor is liable to deduct TDS as per provisions of section 194G of the Income Tax Act, 1961, then, the Deductor is required to deduct TDS within earlier of the following prescribed dates –
- At the time of payment in cash / cheque / draft / any other mode; or
- At the time of credit of income to the account of the payee.
Applicable TDS rates
The provision of section 194G requires the Deductor to deduct TDS @ 5%. It should be noted that no surcharge, education cess or SHE cess shall be levied on the said rate of 5%.
However, in case the PAN is not furnished, the Deductor is liable to deduct TDS @ 20% (maximum marginal rate).
Exemption limit under section 194G
The Deductor would be liable to deduct TDS under section 194G only if the income amount exceeds INR 15,000. In other words, the exemption limit specified under section 194G is INR 15,000 and TDS would be deductible only above that.
Provision of lower / NIL TDS deduction
The payee can, by filing an application in Form no. 13, request the assessing officer for lower TDS deduction or NIL / no TDS deduction. If the payee receives the appropriate certificate from the Assessing Officer, the Deductor would deduct TDS at a lower rate or NIL rate, as directed.
However, section 206AA(4) states that no certificate for lower / NIL deduction shall be granted unless the application contains the Permanent Account Number (PAN) of the applicant.
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