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2021

TDS on Winning from Lottery, Crossword Puzzle or Horseraces (Section 194B and 194BB)

TDS on Winningfrom LotteryCrossword PuzzleorHorseraces

TDS on Winnings from Lottery or Crossword Puzzle (Section 194B)

We all are aware of many famous reality shows and game shows like ‘Kaun Banega Crorepati’, Indian Idol and Dance India Dance etc. These shows offer huge prizes in the form of cash as well as kind. Similarly, many people are fond of buying lottery tickets and some win them too. The income earned from such sources is not tax free. The price money received by a person is subject to TDS under Section 194B of the Income Tax Act, 1961. 

Bare Text:

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.

 

Applicability of Section 194B:

If the Prize money exceeds Rs 10,000, then the winner will receive the prize money after the deduction of TDS @ 30% u/s 194B.
Please note that it does not matter whether the income of the winner is taxable or not. The prize distributor is liable to deduct tax at the time of payment.
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.
The Benefit of basic exemption limit and income tax slab rate is also not applicable to this income.

TDS in case of Price Money in Kind:

In many game & talent shows, price money is paid in kind instead of cash price.
Tax is paid as per the market value of the prize given. The prize distributor can either recover from the winner or he himself can bear the burden of the tax.
The TDS rate shall remain the same i.e. 30%.

TDS in case of Price Money in both Cash and Kind:

In cases where the prize is given both in cash and kind, then the total tax should be calculated on the cash portion of the prize and on the market value of the prize given in kind.
And the tax amount should be deducted while giving the cash portion of the prize to the winner.
But if the cash prize is not sufficient to cover the total tax liability, then either the winner or prize distributor should pay the deficit.

Penalty & Prosecution Provisions:

The person responsible for the tax deduction as discussed, if fails to deduct tax then as per section 271C, he needs to pay a penalty equal to the amount of tax deducted.
Secondly, as per section 276B, only deduction of such tax is not enough, it should be deposited with the government. Non-doing this can result into imprisonment of minimum 3 months up to 7 years fine can be imposed.
Sometimes it may happen that the winning from such games is not given in cash but in kind like a car, mobile phone, foreign trip etc. In these cases, the value of the gift is taken as the relevant Market Value and gift shall be released only after TDS amount is taken from the payee (receiver).

TDS on Winnings from Race Horses (Section 194BB):

Any person, who is responsible for paying to any person any income by way of winnings from any horse race an amount exceeding Rs.10,000 shall deduct income-tax at the rates in force.
Any person here means a book maker or a person to whom a license has been granted by the Government under any law for the time being in force for horse racing in any race course or for arranging for wagering or betting in any race course.
TDS shall be deducted at the rate of 30%.

Payer

Any person paying winning from Horse Races

Payee

Any person winning from horseraces and eligible to receive such income in excess of threshold limit in a financial year.

Payment covered

Winning from Horse Races

At what time tax has to be deducted at source

At the time of payment

Maximum amount which can be paid without Tax Deduction

If the amount of payment is Rs.10,000 or less

Rate of tax deducted at source

30%

 

Person Liable to Deduct TDS u/s 194BB:

As per this section, following persons shall be liable to deduct tax u/s 194BB:

Who is a bookmaker; or
Who has a government license for organizing horse races, wagering or betting then such person will be responsible to deduct tax.

Penalty & Prosecution:

The penalty provisions are similar to section 194B.

 

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