Section 194B & 194BB – TDS on Lottery, Game Show, Puzzle, Horserace

What is Section 194B & Section 194BB?

If you have income from winning a lottery, crossword puzzle, card game, gambling, betting or horse race, TDS is deducted under Section 194B or 194BB if the income exceeds INR 10,000.

  • Section 194B – Payer should deduct TDS is at 30% on winnings from lottery, crossword puzzles, card games and other similar incomes
  • Section 194BB – Payer should deduct TDS at 30% on horse race income
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Incomes under Sec 194B & 194BB

Following are the types of payments as per Section 194B & Section 194BB:

  • Winning from Lottery
  • Crossword Puzzle
  • Races including Horse Race
  • Card Games
  • Gambling
  • Betting
  • Game Shows
  • Any other income of similar nature

When & Who shall deduct TDS u/s 194B & 194BB?

TDS is required to be deducted at the time of payment of the prize. If the payer makes payment in instalments, they must deduct TDS at the time of actual payment of each instalment.

Person liable to distribute the prize for winning from lottery, crossword puzzle, card game, horse race, etc should deduct TDS from the payment and pay the balance amount to the winner. TDS should be deducted only if the winning amount exceeds INR 10,000.

The Deductor should deposit the TDS with the government and file a TDS Return on TRACES.

TDS Rate u/s 194B & 194BB

The payer shall deduct tax at the rate of 30% under Sec 194B from the money paid for winnings from lottery,  crossword puzzle or card game and other similar game if the amount exceeds INR 10,000.

The payer shall deduct tax at the rate of 30% under Section 194BB from the money paid for winnings from a horse race or income from wagering or betting in any racecourse if the amount exceeds INR 10,000.

Due Date to deposit TDS u/s 194B & 194BB

Particulars Time Limit to deposit TDS
If the amount is credited in the month of March
  • On or before 7th April for Government Deductor
  • On or before 30th April for Other Deductor
If the amount is credited in the month other than March Within 7 days from the end of the month in which deduction is made

TDS Certificate

Deductor i.e. prize distributor shall issue a TDS Certificate to the deductee i.e. winner in Form 16A for TDS deducted on income from winning a lottery, crossword puzzle, card game, gambling, betting u/s 194B or income from horse race u/s 194BB.

TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
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TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

TDS Return

The Deductor i.e. prize distributor is liable to deduct tax under section 194BB or Sec 194B of Income Tax Act. They shall file quarterly return in Form 26Q within the following due dates:

Quarter Due Date
April to June 31st July
July to September 31st October
October to December 31st January
January to March 31st May

FAQs

Will tax be deducted if I withdraw my winnings on Dream11?

Income on Dream 11 is a betting income. The income tax rate on such income is 31.2% (30% plus 4% cess). If your net winning from a contest exceeds INR 10,000, they would deduct TDS at 30% and credit the remaining amount to your account. You can then withdraw the funds without paying any additional tax.

If the prize is paid in cash or kind, how should TDS be calculated?

The income tax on prize money from winning lottery, puzzles, card games, etc is a flat rate of 30%. For any prize in kind such as car, jewellery, holiday trip, etc you must calculate tax on the market value of the prize. Thus, the payer should deduct TDS at 30% of the aggregate amount of prize in cash and market value of prize in kind.

I have received TDS Certificate for my winnings from playing poker online. How can I claim TDS Credit?

The income tax rate on income from playing online games is a flat rate of 30%. If the winning amount exceeds INR 10,000, the poker platform would deduct TDS at 30%. They would deposit TDS with the government, file TDS Return and issue TDS certificate to the winner. The taxpayer i.e. winner should file ITR, report such income as taxable income and claim the TDS Credit. However, the taxpayer cannot claim any refund of the TDS deducted on such income.

Income Tax on winning lottery, crossword puzzles, game shows, horse race

Income from winning awards and prizes such as lottery, puzzles, online gaming or TV game shows, card games etc are considered as income from other sources under the head IFOS of Income Tax. The winner may receive such income in cash or kind. The tax rate is flat 30% as per Section 115BB of the Income Tax Act.

  • Winning from Lottery
  • Crossword Puzzle
  • Races including Horse Race
  • Card Games
  • Gambling
  • Betting
  • Game Shows
  • Any other income of similar nature

Income Tax on Awards & Prizes

Such incomes may be earned in form of cash or kind in forms of awards or prizes. The tax treatment depends on multiple factors.

  • Awards
    • If the Award of public interest is approved by the Government, it is exempt from tax. Awards such as National awards, Nobel prize, Arjuna award, Bharat Ratna award, etc notified by the government under Sec 10(17A) is exempt from tax in the hands of the receiver.
      Awards such as filmfare, ICC Cricket awards, etc are taxed as IFOS income since they are not approved by the Government
  • Prizes
    • Prizes earned are taxable in the hands of the winner as Income from Other Sources income (IFOS) as per Sec 56(2) of the Income Tax Act. Income from betting, gambling, sports events, horse race etc are all taxable incomes

Tax Rate on winning lottery, puzzle, game show, horse race

Tax on lottery winning, crossword puzzles, card games, etc is at flat rate of 30%. After adding the health & education cess of 4%, the effective tax rate is 31.2%. The income would be taxed at flat 30% without considering tax slab rates. If the prize is received in kind, tax is calculated at the market value of the item received.

Example

Divya won a lottery and received INR 5 lakh in cash and a diamond ring worth INR 1 lakh. She also has Fixed Deposit Interest income of INR 1 lakh. She has invested INR 1.5 lakhs in Section 80C and also paid INR 25,000 as medi-claim. Calculate the tax liability.

Particulars Amount (INR)
Income from Other Sources  
Fixed Deposit Interest  1,00,000
Winning from Lottery 6,00,000
Gross Total Income 7,00,000 
Deductions under Chapter VI-A (1,00,000)
Total Income 6,00,000
Tax at slab rate NIL
Tax at special rate (30%) 1,80,000
Total Income Tax 1,80,000
Health & Education Cess @4% 7,200
Total Tax Liability 1,87,200

TDS on prizes & winnings

TDS under Section 194B is applicable on income from lottery, betting, gambling etc. If the income exceeds INR 10,000 during the financial year, the prize distributor is liable to deduct TDS at 31.2% at the time of making the payment.

TDS under Section 194BB is applicable on income from activity of owning and maintaining horse races. If the income exceeds INR 10,000 during the financial year, the horse race organiser is liable to deduct TDS at 31.2% at the time of making the payment.

ITR Form & Due Date

  • ITR Form: Winnings from lottery, puzzles, betting etc is treated as Income from Other Sources. The taxpayer should file ITR-1 (if income is upto INR 50 lacs) or ITR-2 (if income exceeds INR 50 lacs) on the Income Tax Website.
  • Due Date – 31st July of the Assessment Year. For eg: Due Date to file ITR of FY 2020-21 (AY 2021-22) is 31st July 2021.

Special Provisions for tax on winning lottery, puzzle, game show, horse race

If a taxpayer has income from winning a lottery, puzzle, card game, gambling, etc, here are important provisions applicable:

  • The taxpayer cannot claim deductions under chapter VI-A such as Sec 80C, 80D, 80G etc for such income
  • The taxpayer cannot claim any expenses against such income
  • Income Tax on such income is at a flat rate of 31.2% and thus the taxpayer cannot claim benefit of basic exemption limit and slab rates
  • The taxpayer cannot claim any refund of the TDS deducted on such income
  • Loss from owning and maintaining horse race cannot be set-off against any income except horse race income. Taxpayer can carry foward the remaining loss for 4 years

FAQs

I have won a lottery. Should I pay taxes on lottery income?

Income from winning a lottery, card game, competition, betting, gambling etc is a special rate income. Tax rate on such income is 31.2% as per Section 115BB of Income Tax Act. Taxpayer cannot claim benefit of slab rates or the basic exemption limit. The prize distributor would have deducted TDS at 30% before making the payment to winner.

If the prize is paid in cash or kind, how should tax be calculated?

Income Tax on winning lottery, puzzles, card games, etc should be calculated at 31.2% (30% plus 4% cess) of the total prize money. If the prize is paid in kind such as car, jewellery, holiday trip, etc the tax should be calculated on the market value of the prize.

Do I have to pay tax if I withdraw my winnings on Dream11?

Income on Dream 11 is considered as a betting income. Dream 11 tax is calculated at 31.2% (30% plus 4% cess). If your net winning from a contest exceeds INR 10,000, they would deduct TDS at 30% and credit the remaining amount to your account. You can then withdraw the funds without paying any additional tax.