Budget 2025 proposes a simpler threshold for TDS on winnings from horse races, lotteries, etc. Tax will now be deducted only if winnings from a single transaction exceed Rs 10,000 in a financial year, instead of the aggregate threshold.
For example, if an individual wins Rs 5000, Rs 8000, and Rs 12,000 in a year, TDS would be deducted only after the Rs 12,000 win, as the new rule applies to single transactions exceeding Rs 10,000.
Section 194B: TDS on Winnings from Lottery or Crossword Puzzles
Have you ever wondered about people who win money on game shows like Kaun Banega Crorepati, Bigg Boss, Indian Idol, etc., paying tax or not? Do they take the whole money home?
The answer is NO. This is where the concept of TDS u/s 194B comes into play. Under this section, TDS is deducted from any income earned as winnings from the lottery, crossword puzzles, card games, or other ways like entertainment shows; game shows on TV, etc. From the money paid for winnings from the lottery, crossword puzzles, card games, and other similar incomes, the payer should deduct 30% TDS if the amount exceeds Rs.10,000.
Applicability of Section 194B
- Lottery
- Crossword puzzles
- Fantasy sports
- Gambling
- TV shows
- Card games
- Race betting
- Other Incomes of similar nature
Who is required to deduct TDS u/s 194B?
The payer who pays the price money is required to deduct TDS under Section 194B, provided the value of the prize or earnings exceeds ₹10,000.
What is the rate of of TDS u/s 194B?
If the winning amount exceeds Rs.10,000, then 30% is the TDS rate on the actual winning amount or value to be deducted.
When should TDS be deducted Under Section 194B?
The TDS must be deducted when the winning amount is paid.
What is the Penalty for non-compliance under Section 194b?
The person responsible for the tax deduction, as discussed, fails to deduct tax at source before paying the winning amount, then this could lead to a minimum imprisonment of 3 months and a maximum imprisonment of 7 years. Additionally, a fine may also be imposed.
How is Tax Computed on Lottery Winnings?
- Identify Total Winnings: Determine the full amount of your lottery winnings before any deductions or taxes are applied.
- Apply the Tax Rate (30%): Lottery winnings are taxed at a flat rate of 30%. Calculate your basic tax liability using:
Tax = Total Winnings × 30% (0.30)
- Add Health and Education Cess (4%): Add 4% of the basic tax liability as health and education cess:
Cess = Basic Tax × 4% (0.04)
-
Check for Surcharge (if applicable): If your winnings exceed INR 50 lakh, a surcharge is added to the tax liability:
- 10% surcharge on winnings between INR 50 lakh and INR 1 crore.
- 15% surcharge on winnings above INR 1 crore.
Surcharge = (Basic Tax + Cess) × Applicable Rate (10% or 15%)
- Calculate Total Tax Liability: Add the amounts from steps 2, 3, and 4 to determine the total tax liability:
Total Tax = Basic Tax + Cess + Surcharge (if any)
- Adjust for TDS (Tax Deducted at Source): If TDS has already been deducted from your winnings, subtract the TDS amount from the total tax liability to calculate the remaining tax payable or any refund due:
Final Tax Payable/Refund = Total Tax - TDS Deducted
Section 194BB: TDS on Winnings from Race Horses
The trend of organizing racehorses has seen a huge fuss in the past few years. With so many people betting on their favorite “studs” to win money, the intervention of Income Tax Law has surely not been far behind. This brought into existence Section 194BB.
Who is required to deduct TDS u/s 194BB?
As per this section, a person
- who is a bookmaker or Turf accountant
- have a government license for organizing horse races, wagering, or betting; then, such a person will be responsible for deducting tax.
What is the rate of of TDS u/s 194BB?
TDS Rate under section 194BB is 30% plus surcharges. The deduction is made at the time of payment. If the prize is paid in installments, a TDS deduction will be made at the time of each installment. No tax deduction will be required if the winning amount is within Rs 10000.
What is the Penalty for non-compliance under Section 194B?
The penalty provisions are similar to section 194B. The person responsible for the tax deduction, as discussed, fails to deduct tax at source before paying the winning amount, then this could lead to a minimum imprisonment of 3 months and a maximum imprisonment of 7 years. Additionally, a fine may also be imposed.
What is the due date to deposit TDS U/S 194B & 194BB?
The deadline for depositing TDS depends on the month of credit and the type of deductor. For Government Deductors, the TDS must be deposited by the 7th of April if the credit is made in March. For Other Deductors, the deadline is 30th April for the same month. For any other month, the TDS must be deposited within 7 days after the end of the month in which the deduction is made.
TDS Certificate to the Prize Winner
The prize distributor, i.e., the deductor, is required to issue a TDS certificate in Form 16A to the winner, i.e., deductee. This certificate pertains to the TDS deducted on income earned through winnings, whether from a lottery, crossword puzzle, card game, gambling or betting under Section 194B or from income derived from horse races under Section 194BB.
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