Section194B TDS on Winnings from lottery or crossword puzzle

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.

Summary of Section 194B of the Income Tax Act

• Deductor/ Payer: Any Person
• Deductee/ Payee: Any Person (whether resident or non-resident)
• Nature of Payment: Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort
• Rate of TDS:
  • TDS to be deducted at flat rate @ 30%
  • Cess @ 4% will be added in above rate in case of deductee is non-resident
• Threshold Limit: Exceeding Rs. 10,000/-
• Time of deduction: At the time of payment
• Taxation in case of wining amount in cash:

Mr. Rahul win a prize of an amount of Rs. 10 lakhs in a bodybuilding championship.

Computation of TDS liability as under:

TDS: Rs. 3,00,000 (i.e. 1000000*30%)

This tax liability may be recovered from Mr. Rahul and the same can be deposited with the Government on account of tax deduction.

• Taxation in case of wining amount in kind:

Mr. Mohit win a car with a market value of Rs. 10 lakhs in a draw of lot organised by Maruti Udyog.

Computation of TDS liability as under:

TDS: Rs. 3,00,000 (i.e. 1000000*30%)

This tax liability may be recovered by Maruti Udyog from Mr. Mohit and the same can be deposited with the Government on account of tax deduction.

• Taxation in case of wining amount partly in cash & partly in kind:

Mr. Jonny win a prize money of Rs. 5 lakhs in cash and win a bike with a market value of Rs. 5 lakhs in a draw of lot organised by Hero Honda.

Computation of TDS liability as under:

TDS: Rs. 3,00,000 (i.e. 1000000*30%)

This tax liability may be recovered by Hero Honda from Mr. Jonny and the same can be deposited with the Government on account of tax deduction.

• Point to be Noted:
  • As per section 56(2) (ib) any income arise from winnings from crossword puzzles, lotteries, card games and other game of any sort are always taxable under the head ‘Income from other sources’.
  • Deduction under section 80C or 80D or any other kind of deduction or allowance is not applied on this income. The basic exemption limit and income tax slab rate are also not applicable.