Section 194B – TDS on Lottery, Games, Betting and Game Shows
What is Section 194B of Income Tax Act?
Section 194B of Income Tax Act, 1961 states that winnings from lotteries, game shows, card games, online games, crossword puzzles, quiz shows, and dance competitions will attract a TDS (full form: Tax Deducted at Source) of 30%, provided the earnings exceed ₹10,000.
Applicability of Section 194B of the Income Tax Act
Section 194B is applicable on the winnings or prize from any of the following:
- Lottery (online and offline) or raffle
- Sweepstake
- Crossword puzzles
- Betting (online and offline)
- Card games
- Gambling (online and offline)
- TV shows, including game shows, quiz shows, singing competitions, dance competitions, etc.
- Fantasy sports
How to Calculate TDS Deduction Under Section 194B?
Income from game shows and lotteries is counted separately from the rest of one’s income for taxation purposes. Winnings from such sources fall under the head ‘Income from other sources’.
Let’s say Sanjay has won ₹10,00,000 from a TV game show. The taxable income from his business is ₹8,00,000 after factoring in all tax exemptions. Now, the TDS on his winnings from the game show won’t be clubbed with his taxable income of ₹8,00,000. Currently, there is no tax on income up to ₹3 Lakh. From ₹3 Lakh to ₹6 Lakh, a rate of 5% is applicable and on income between ₹6 Lakh and ₹9 Lakh, a rate of 10% is applicable.
So, based on his income tax slab, his income tax liability will be calculated based on ₹15,000 (=5% of ₹3 Lakh)+ 10% of his income above ₹6 lakh i.e. ₹2 Lakh. So, Sanjay’s income tax liability will be ₹15,000+ 10% of ₹2 lakh = ₹(15,000+20,000)= ₹35,000.
However, on his game show winnings of ₹10,00,000, a rate of 31.2% will be levied at source. So, the TDS amount on his winnings will be ₹3,12,000. Therefore, Sanjay’s actual earnings from the game show will be ₹(10,00,000-3,12,000)= ₹6,88,000.
Who Deducts Tax Under Section 194B?
The person paying the prize money, which is usually the organiser of the lottery, crossword puzzle, game shows, dance competitions, etc., is liable to deduct TDS under Section 194B, provided the value of the prize or earnings exceeds ₹10,000.
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When to Deduct TDS Under Section 194B of Income Tax Act?
The tax applicable on the winnings from a game show, lottery, tv show, crossword puzzle, etc. must be deducted at the time when the winning amount is paid. If the winning amount is paid in instalments, the TDS will be applied on each instalment at a proportionate rate.
Rate of TDS Under Section 194B
The rate of TDS applicable on income under Section 194B is 30% on the actual winning amount or value. After considering surcharge and cess, the applicable tax deducted at source becomes 31.2%.
However, for non-resident deductees, a cess of 4% is applicable in addition to the base TDS rate of 30%.
Limit for Deducting TDS Under Section 194B
The limit for tax exemption on tax deductible at source under Section 194B of the I-T Act, 1961 is ₹10,000.
Penalty for Non-Compliance Under Section 194B
Under Section 194B of the Income Tax Act, the payor is liable to deduct tax at source before paying the winning amount to the winner. Failure to deduct tax at source at the applicable rate, could lead to a minimum imprisonment of 3 months and a maximum imprisonment of 7 years. In addition, a fine may also be imposed.
Things to Note About TDS Under Section 194B
- TDS is applicable in full (i.e. at 31.2%) regardless of the winner’s tax bracket.
- No income tax deductions can be claimed on the winning amount.
- When a prize has both a cash and a non-cash component, TDS is deducted from the cash component only.
- If the prize money is paid in instalments, a TDS deduction will take place at a proportionate rate on each instalment.
- Participants and players in these games must provide their PAN and bank account details to the organiser.
- You cannot claim refunds against TDS payments made u/s 194B.
- If the prize is in the form of a gift, such as a car or a holiday package, the organiser of the show, contest, or game is liable to withhold the winnings until such time as the winner has paid the amount equivalent to their TDS obligations to the organiser or the winner has settled the TDS directly and submitted the proof of the same to the organiser.
Final Word
Section 194B of I-T Act, 1961 stipulates that any winnings above ₹10,000 from games, tv shows, quiz shows, betting, etc. shall attract a TDS rate of 30%, irrespective of the income tax bracket of the winner. Moreover, the winnings cannot be clubbed with the regular income of the winner.
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FAQs
While Section 194B deals with winnings from lotteries, crossword puzzles, card games, etc., Section 194BB deals only with winnings from a horse race. From 2020, flat 30% TDS plus surcharges are applicable on winnings above Rs. 10,000.
Winnings from a lottery have a flat 31.2% TDS applicable, including surcharge and cess under Section 194B. So, winnings of Rs. 1 crore will have Rs. 31.2 lakh TDS applicable u/s 194B (31.2% of Rs. 1,00,00,000).
No, the TDS paid for winnings from lotteries and game shows are non-refundable. Usually, taxpayers can claim a refund if the TDS deduction is more than their tax liability in an assessment year. That said, for lottery winnings, you cannot claim any refund.
No, if you have paid any bonus to commission to lottery agents or sellers of lottery tickets, you do not have to pay TDS on it. Taxes deducted u/s 19B will apply after deduction of such bonus and commission from your winnings.
For winnings in kind or gifts, you have to pay the applicable TDS before receiving such presents. If you win a car worth Rs. 10 lakh, you have to pay Rs. 3,12,000 (31.2% of Rs. 10,00,000) out of your own pocket.
The following types of payments are not eligible for TDS under Section 194B:
-If a certain percentage has to be paid to the Government or to the lottery agent, then such amount will not be eligible for TDS
-If an agent receives prize money on unsold tickets or unclaimed prize, then it becomes part of his business income which is not eligible for deduction under Section 194B
-Payments made to lottery agents in form of commissions will be eligible for tax deduction under Section 194G and not 194B
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