TDS on Winnings from Lotteries, Crossword Puzzles & Horse Races [Sections 194B and 194BB]: Any income of a casual and non-recurring nature of the type of winnings from lottery, crossword puzzle, card game and other game of any sort, races including horse races, etc. will be charged to income-tax at a flat rate of 30% [Section 115BB].
- TDS On Interest Other Than Interest On Securities [Section 194A] – TDS Rate, Exemption, Applicability
- TDS On Dividends [Section 194] – TDS Rate, Applicability, Exemptions
Topics covered in this article
TDS on Winnings from Lotteries, Crossword Puzzles & Horse Races [Sec. 194B & 194BB]
- Under Section 194B of Income Tax Act, Any person responsible for paying to any person any income by way of winning from any lottery or crossword puzzle or card game and other game of any sort, exceeding ₹10,000.
- Under Section 194BB of Income Tax Act, Any person responsible for paying to any person any income by way of winning from horse races, exceeding ₹10,000.
TDS on Winnings from Lotteries or Crossword Puzzles [Section 194B]
The person responsible for paying to any person any income by way of winnings from lotteries or crossword puzzles or card game and other game of any sort, an amount exceeding Rs. 10,000 shall deduct tax at the prescribed rates at the time of such payment and a statement in Form No. 26 has to be filed by the end of the month of June falling in the financial year immediately following the previous year.
- 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 instalments, then tax shall be deducted at the time of payment of each instalment.
- Tax shall be deducted on payment of commission, etc. to the lottery agent u/s 194G and not u/s 194B.
Winnings from Horse Races [Section 194BB]
Income-tax has to be deducted at source from any income by way of winnings from horse races at rate of 30%. Deduction of tax at source will be made only in cases where the income by way of winnings from horse races to be paid to a person exceeds Rs. 10,000.
The obligation to deduct tax at source will apply only where such winnings are paid by a book maker or a person to whom a licence 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.
- Any person, here means a book-maker or a person to whom a licence has been granted by the Government for horse racing or arranging for wagering, betting in any race course.
- Race-income other than horse races like camel races etc is not covered by this section.
Rate of tax on casual income
Rate of TDS Winnings from Lotteries, Crossword Puzzles & Horse Races [Sections 194B and 194BB]: 30% (in case of non-resident payee, applicable surcharge, health and education cess shall also be considered)
|Payee||Rate of TDS as a % of amount paid or payable|
|Non-Resident||30% + Surcharge + Health & Education Cess|
TDS on winning from lotteries, crossword puzzles etc.
According to the provisions of section 194B, every person responsible for paying to any person, whether resident or non-resident, any income by way of winnings from lottery or crossword puzzle or card game and other game of any sort, is required to deduct income-tax therefrom at the rate of 30% if the amount of payment exceeds ₹10,000. Winnings by way of jack pot would also fall within the scope of section 194B.
Cases where winnings are partly in kind and partly in cash
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.
Person responsible for deduction of tax under section 194BB
Section 194BB casts responsibility on the following persons to deduct tax at source –
- A bookmaker; 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.
Threshold limit and rate of TDS under section 194BB
The obligation to deduct tax at source under section 194BB arises when the persons make payment to any person of any income by way of winnings from any horse race in excess of ₹10,000. The rate applicable for deduction of tax at source is 30%.
Tax will have to be deducted at source from winnings from horse races even though the winnings may be paid to the person concerned in instalments of less than ₹10,000. Similarly, in cases where the book-maker or other person responsible for paying the winnings, credits such winnings and debits the losses to the individual account of the punter, tax has to be deducted @30% on winnings before set-off of losses. Thereafter, the net amount, after deduction of tax and losses, has to be paid to the winner.
Meaning of the expression “Horse Race”
In the context of the provisions of section 194BB, the expression ‘any horse race’ used therein must be taken to include, wherever the circumstances so necessitate, more than one horse race.