Taxation of Prize Money and Lottery Winnings in India

In India, any winnings from lotteries or competitions are subject to taxation under the Income Tax Act of 1961. This tax applies to both resident and non-resident winners, with a flat rate of 30% on the total amount won. It is important to note that the tax is deducted at source by the entity awarding the prize money, and the winner receives the amount after deducting the tax at the applicable rate.

The term ‘person’ under the Income-tax Act includes natural and artificial entities such as individuals, firms, companies, and local authorities. Therefore, any winnings from lotteries or competitions are taxable under the heading “Income from Other Sources.”

Section 194B of the Indian Income Tax Act deals with the TDS on lottery winnings, card games, TV shows, crossword puzzles, etc. According to this section, any person responsible for paying any income exceeding Rs. 10,000 by way of winnings from any lottery, crossword puzzle, card game, or any other game must deduct TDS at the rate of 30% before making the payment to the winner. After adding surcharge and cess, the applicable TDS becomes 31.2%.

It is crucial to pay the applicable taxes on lottery or prize money winnings to avoid penalties and legal consequences. Consulting a qualified tax professional for guidance on your specific situation is advisable.

The Indian Government collects income tax through three means: voluntary payment by taxpayers into designated banks, taxes deducted at source [TDS] from the income of the receiver, and taxes collected at source [TCS]. Every person earning income has a constitutional obligation to compute their income and pay taxes correctly.

Staff Reporter