Section 194B - Winning from Lottery, Puzzle, Game and Horse Races

Hello, in this post we will see on Section 194B in TDS under Income Tax. Here we will discuss in detail the topics given below:

What is Section 194B?

If a person wins a lottery or online/TV game shows and receives the prize in cash or as an item then it is taxable under Income from other sources.

The flat tax rate is 30% and after adding cess the entire amount will be taxable at a rate of 31.20%.

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.

Income from other sources include:

  • Lottery
  • Game show/entertainment program on television or online.
  • Crossword Puzzle
  • Gambling or betting
  • Races (like Horse races).

Who can deduct TDS under Section 194B?

The TDS will be deducted by the organiser / distributor or the prize. Every prize distributor should only release the prize for the winner after the tax deduction.

Rate of TDS under Section 194B

At the time of payment, deduction of TDS happens at the rate of 30%. If the cash amount is not above Rs. 10,000 in a given Financial Year, then tax is not deducted.

For instance, Srilakshmi won prize money of Rs 3 lakhs from a game show and she has an interest income of Rs 5 lakhs per annum. Then her tax liability will be:

Tax on Rs 3 lakhs is at the rate of 31.2%, including the cess amount.
Tax on Rs 5 lakhs as per income tax slab rates after claiming the deductions.

Penalty for TDS payment failure

If the person responsible fails to deduct tax as per section 271C, then they need to pay a penalty equal to the amount of tax which has to be deducted.

As per section 276B, the deductor should deposit the tax deducted to the government. If not, it can lead to imprisonment for a minimum of 3 months to 7 years or fine.

Note:

If the prize is in the form of a car, mobile phone, foreign trip etc., then the value is taken as per the current Market Value and the release of the gift will happen only if TDS is deducted.

The prize distributor can let the winner pay the tax for the prize or he can pay the tax instead of the winner.

The valuation for any holidays, insurance products and contracts etc. is based on circumstances and it may vary from one situation to another.

For example, the valuation to deduct tax if you get a holiday reward is based on how much it will cost a third party for the same.

With that, we have come to the end of this post. Let us know about your views and opinions in the comments section below.