TDS Section 194B
TDS On Winnings From Lottery Or Race Horse
In this post, we will see about TDS Section 194B 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 under TDS Section 194B is 30%.
Deduction under section 80C or 80D or any other kind of deduction or allowance is not applied to 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 organiser/distributor of the prize won will deduct the TDS, and they should only release the prize for the winner only after deducting TDS Section 194.
If the payment of the prize amount is made in instalments, the deduction will be made at the time of actual payment of each installment.
Rate of TDS under Section 194B
- At the time of payment, the deduction of TDS normally 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.
- If the recipient is a non-resident other than a foreign company, the tax rate is 30.90%, (including 2% education cess and 1% secondary and higher education cess).
- The recipient is a non-domestic company and the payment does not exceed 1 crore, tax rate is 30.9%. If the payment is over 1 crore, tax rate will be 31.6725%.
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 30%.
- 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 that 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 a 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.
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