In this changing era, we always try to find any other passive source of income. In India, there is a very popular business of selling lottery tickets. But the person who is receiving such income from the sale of lottery tickets in Section 194G is liable to pay taxes.
Applicability of Section 194G
This section is mainly applicable to those persons who are either Distributors, Purchasers, or Sellers receiving income in the form of Commission, Remuneration, or prize on the sale of lottery tickets are liable to pay taxes. The person who is paying such income is liable to deduct taxes.
The Deductor is liable to deduct TDS only if the amount exceeds INR 15,000.
Rate of TDS u/s 194G
- The deductor is liable to deduct TDS at the rate of 5%.
- No Surcharge and Educational Cess will be levied on the above TDS rate.
- If the Deductee has not quoted his PAN then the rate of TDS will be 20%.
When to Deduct TDS u/s 194G?
TDS should be deducted earlier for the following:
- At the time of credit of such income to the account of the receiver.
- At the time of payment in Cash/Cheque/ECS or any other mode.
Lower/NIL TDS Certificate
The payee can request to Assessing Officer for a Lower/NIL TDS certificate in Form No. 13. If the payee receives the certificate from the officer then he can submit the same to the Payer so that he deducts TDS according to that. The person who is applying for such a certificate should have a valid PAN.
TDS Return
The deductor i.e Payer is liable to deduct tax under Section 194G of the Income Tax Act. They shall file a Quarterly Return of TDS in Form 26Q.
TDS Certificate
The deductor shall be liable to provide a TDS Certificate in Form 16A to the deductee. The deductor can download the form from the TRACES.
FAQs
The rate of TDS will be 5%.
Section 44AD will not be applicable in the case of an Agency business as well as in the case of a business earning income from a Commission or Brokerage.
The major difference is the nature of payment and the person to whom payment is made. If a lottery ticket agent wins any reward from the ticket he purchased for himself then the tax will be deducted under Section 194B of the Income Tax Act.
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