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.
Such incomes may be earned in form of cash or kind in forms of awards or prizes. The tax treatment depends on multiple factors.
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.
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.
|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)|
|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 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.
If a taxpayer has income from winning a lottery, puzzle, card game, gambling, etc, here are important provisions applicable:
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.
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.
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.