Table of Contents
1. Section 194B and 194BB of the Income Tax Act, 1961
Section 194B and 194BB contains provisions relating to TDS on winnings from lottery, crossword puzzle or any game and winnings from horse race respectively.
2. Who should deduct tax under section 194B and 194BB?
Tax should be deducted by the person responsible for paying to any person any income by of winnings from
- Lottery
- Crossword puzzle
- Card games or any games
- Horse races
3. Is TDS under section 194B applicable to winnings from online games such as rummy, poker or dream 11?
Yes, Tax will be deducted under section 194B at the rate mentioned below before making payment of the same.
4. What is the maximum limit upto which no tax needs to be deducted under section 194B and 194BB?
No tax needs to be deducted if the winnings from the above mentioned activities do not exceed Rs. 10,000.
5. What is the rate at which tax should be deducted under section 194B and 194BB?
Tax is deducted at the rate of 30% on the amount of winnings from the aforementioned activities.
6. Is surcharge and cess applicable on the above mentioned rate while deducting tax under section 194B and 194BB?
Yes, applicable surcharge and cess at the rate of 4% has to be added to the 30%.
7. TDS in the case of winnings in kind
- If the winnings are wholly in kind or partly in cash and partly in kind, the person who is responsible for paying the winnings should ensure that sufficient tax is first paid to the government before remittance of the winnings (in cash or kind).
- e. either the person responsible for paying the winnings or the person receiving the winnings should pay the tax to the government before remittance of the winnings.
8. Example for the above mentioned case
- Amit wins a car in a lucky draw from B Ltd, the market value of the car is Rs. 3 lakhs. In this case, tax of Rs. 90,000 (3,00,000 * 90%) has to be paid to the government before giving the car to Amit.
- If the tax is paid by Amit, the amount of tax to be paid is Rs. 90,000 before taking possession.
- If the tax is paid by B Ltd, tax has to be paid on the grossed up amount,
- i.e. The market value of the car is considered as net remittance after deducting TDS, therefore the grossed up amount = Rs. 3,00,000 / 0.70% = Rs. 4,28,571
- Amount of tax to be deducted in this case= Rs. 4,28,571 * 31.2% = Rs. 1,33,714
9. Can an assessee claim refund of tax deducted under section 194B or 194BB?
No, the assessee cannot claim refund of tax deducted under this section as it is a straight income tax on the income of the assessee.
10. Should an individual, file return of income under section 139 of the Income tax act, 1961 in respect of such winnings?
Yes, the individual who has income by way of winnings from any of the aforementioned activities should file a return of income if his/her gross total income exceeds the basic exemption limit.
11. Should tax be deducted under section 194B on bonus or commission payable to lottery agents?
- Bonus or commission paid to lottery agents out of the winnings should not be included for the purpose of deducting tax under this section.
- e. if a person wins Rs.1,50,000, on which Rs. 10,000 is paid as commission to lottery agent, tax should be deducted on Rs. 1,45,000 only.