Section 194B of the Income Tax Act mandates a 31.2% TDS on winnings exceeding ₹10,000 from lotteries, game shows, and other sources. This article explains how TDS applies, covers scenarios involving cash or in-kind prizes, and provides key insights. FAQs address common queries on TDS deductions for lottery and game show winnings.
Introduction
Section 194B of the Income Tax Act, 1961, mandates that winnings from lotteries, game shows, card games, online games, crossword puzzles, quiz shows, and dance competitions are subject to a Tax Deducted at Source (TDS) at a rate of 31.2%, provided the winnings exceed ₹10,000. Know more about How Can TDS on Lottery Be Refunded?
TDS on Lottery, Game Show Winnings and Other Casual Income
Game shows like ‘Kaun Banega Crorepati’ and reality shows such as Indian Idol and Dance India Dance offer substantial prizes in cash or kind (e.g., cars or houses). These earnings are subject to taxation, with TDS deducted before disbursal.
TDS applies if prize money exceeds Rs 10,000, deducted at 31.2% under u/s 194B. The tax is deducted regardless of the winner’s taxable income, at the time of payment.
For winnings from horse races exceeding Rs 10,000, TDS is applicable. No deductions or expenditures are permitted from this income. Section 80C, 80D, or any other allowances cannot be applied. Basic exemption and income tax slab rates do not apply; the entire amount is taxed at a flat rate of 31.20%.
For example, if Rahul wins Rs 3 lakhs from a game show and earns Rs 5 lakhs interest p.a., tax is calculated separately on Rs 3 lakhs at 31.2%, and on Rs 5 lakhs using income tax slab rates after relevant deductions.
If prizes are given in kind, such as a car, the distributor must ensure tax is paid based on the market value of the prize. The distributor can either recover the tax from the winner or bear the burden.
For example, if Suman wins a car worth Rs 4 lakhs, a 31.2% tax of Rs 1,24,800 must be paid before giving the car.
If prizes are given in both cash and kind, tax is calculated on the cash portion and the market value of the prize in kind. The tax amount is deducted from the cash portion. The winner or distributor must pay the deficit if the cash prize is insufficient to cover the total tax.
Important Points Regarding TDS Deducted on Lottery Winnings Under Section 194B
- TDS applies at a fixed rate of 31.2%, irrespective of the winner’s tax bracket.
- No income tax deductions are allowed on the prize money.
- When a prize includes both cash and non-cash components, TDS is deducted only from the cash part.
- If the prize money is paid in instalments, TDS is deducted proportionately from each instalment.
- Participants and players must furnish their PAN and bank details to the organizer.
- Refunds for TDS payments under Section 194B cannot be claimed.
- If the prize is a gift like a car or a holiday package, the organizer retains the winnings until the winner either pays the equivalent TDS amount or provides proof of direct TDS payment to the organizer. You make the TDS Calculation on Salary Online with our Tool.
FAQs:
Who deducts TDS from lottery or game show winnings?
The organization providing the prizes deducts TDS before payout.
Can I claim a deduction if I invest the prize money in FDs or ELSS?
No, there are no deductions for winnings from game shows or lotteries.
Can I claim a refund of TDS under section 194B?
No, as per Section 194B you will not be eligible for a refund.
Should tax be deducted under Section 194B on a bonus or commission payable to lottery agents?
No, bonuses or commissions paid to lottery agents from winnings are not subject to tax under Section 194B.
Who should apply for a TDS certificate for tax deducted from the prize amount?
The deductor (prize distributor) will issue the TDS certificate in Form 16A under Section 194B.
Read more:-
- Online TDS Refund: How to Get TDS Return Faster?
- Different Types of TDS Deduction
- Who Is Liable to Deduct TDS under Section 194J?
