Winning from lotteries, card games, online gaming, and television shows can be exhilarating, but these winnings also attract taxes under Section 194B of the Income Tax Act. Section 194B mandates the deduction of TDS (Tax Deducted at Source) on winnings exceeding ₹10,000 from lotteries, card games, quiz shows, and other similar competitions. Understanding the tax implications of such winnings is crucial for taxpayers, ensuring they comply with the applicable tax laws.
Under Section 194B of the Income Tax Act, when a person wins a lottery, card game, online game, or any other similar event, and the prize exceeds ₹10,000, TDS must be deducted before the winner receives the prize money. The winner is responsible for paying taxes on such earnings, and the prize distributor is required to deduct TDS at a flat rate of 30% before making the payment.
This provision applies to:
In cases where the prize is partly or fully in kind (e.g., a car or a vacation package), the tax must still be deducted. If the cash portion of the prize isn’t sufficient to cover the TDS liability, the payer may require the winner to deposit the balance amount before releasing the prize.
You may also want to know Section 194D – TDS on Insurance Commission
Section 194B applies when the following criteria are met:
Key Note: The payer is responsible for deducting TDS before making any payment to the winner.
In cases where the prize is wholly in kind (e.g., a car or a luxury item), the payer is required to ensure that TDS is paid on the prize value. If the cash component isn’t sufficient to cover the TDS amount, the payer must arrange for the winner to deposit the balance amount to meet the tax liability.
The TDS on winnings under Section 194B is charged at a flat rate of 30%. There is no surcharge or cess applied to this rate, making it a straightforward deduction.
| Prize Winnings | TDS Rate |
| Above ₹10,000 | 30% |
Important Note: There is no basic exemption limit for TDS under this section, and the full amount is taxable if it exceeds ₹10,000.
Consider a winner who wins ₹15,000 from an online gaming event. Since the prize exceeds ₹10,000, a TDS of 30% will be deducted:
If the payer fails to deduct or deposit TDS, they will be penalized. The penalties may include:
TDS under Section 194B is calculated on the total amount of winnings exceeding ₹10,000. The winnings are treated as income under the head “Income from Other Sources,” and the flat 30% rate is applied without any deductions or exemptions.
If someone wins ₹50,000 in a quiz show, the calculation will be as follows:
The entire amount won, including the TDS deduction, will be reported as income for tax purposes.
Section 194B of the Income Tax Act ensures that tax is levied on earnings from lotteries, game shows, and gambling. Both the winners and the payers should be aware of their responsibilities under this section. While the payer must deduct the tax at source, the winner should report these earnings as income and meet all tax obligations. The penalties for non-compliance are severe, emphasizing the importance of adhering to the rules outlined in Section 194B.
No, TDS under Section 194B is applicable only when the prize amount exceeds ₹10,000.
Yes, if the prize is wholly or partly in kind, TDS must still be deducted or paid by the winner before the prize is awarded.
The TDS rate on winnings from lotteries, card games, and other specified competitions is 30% without any surcharge or cess.
No, there are no exemptions for TDS under Section 194B. All winnings over ₹10,000 are subject to the flat 30% tax.
If the payer fails to deduct or deposit TDS, they may face penalties, including paying an amount equal to the undeducted tax and possible imprisonment of 3 months to 7 years.
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