As per Section 115BB, a flat tax rate of 30% is applicable on income arising by way of winnings from any: –
- Lottery
- Crossword Puzzle
- Race including horse race (not being income from the activity of owning and maintaining race horses)
- Card Game and other game of any sort ( As per Section 24(ix) includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar games such as Kaun Banega Crorepati etc.)
- Gambling or betting of any form or nature
Special notes related to income under Section 115BB
- No benefit of basic exemption limit is available. In other words, if you have a single income in a year from winning of puzzle amounting to Rs 20,000 then the tax liability (before rebate under section 87A) shall be Rs 6,000.
- No deduction under Chapter VI-A (Section 80C to Section 80U) shall be allowed from such income.
- No deduction in respect of any expenditure or allowances in connection with such income shall be allowed under any provision of this act in computing such income as per Section 58(4).
- Tax deposited in respect of such income shall not be refundable expect the amount of rebate under section 87A which is claimed by the winner
- Surcharge and education cess shall be paid by the winner at the time of filing his income tax return.
- Such income shall be chargeable to tax as Income from Other Source as per Section 56(2)(ib)
Applicability of TDS
As per Section 194B, TDS at the special rate of 30% is applicable if the amount of winning exceed Rs 10,000
- Lottery
- Crossword Puzzle
- Card Game and other game of any sort
- Gambling or betting of any form or nature
TDS on winning from horse race is deductible @30% if the amount of winning exceeds Rs 10,000 and covered by Section 194BB.
Winning in Cash
If the winning from lottery etc. is in cash and exceeds Rs 10,000 then the person responsible for paying such amount should deduct TDS @ 30% on the whole amount under section 194B (or 194BB in case of winning from horse race) before making such payment.
Winning wholly in Kind or Partly in cash and Partly in Kind
If the winning is wholly in kind (such as car etc) or partly in cash and partly in kind then the person responsible for paying shall before releasing the winning ensure tax @ 30% has been paid in respect of such winning. The tax shall be calculated on the basis of the market value of the winning such as car etc. along with the winning in cash. Generally, the amount of tax or shortfall in tax is collected from the winner and deposited to the government by the organiser.
Comprehensive Example for computation of income for Financial Year 2017-18
Example: Mr. X wins Rs 3,00,000 cash from the lottery. TDS of Rs 90,000 has been deducted on such receipt. He has no other income during the year.
| Computation of Income | Amount |
| Income from Other Sources | 3,00,000 |
| Total Income | 3,00,000 |
| Tax @ 30% (special rate) | 90,000 |
| Rebate u/s 87A | 2,500 |
| Gross Tax | 87,500 |
| Education Cess | 2,625 |
| Total Tax | 90,125 |
| T.D.S. | 90,000 |
| Tax Payable (excluding interest and rounding off u/s 288, if any) | 125 |
Example: Mr. X wins Rs 15,00,000 cash from the lottery. TDS of Rs 4,50,000 has been deducted on such receipt. He has no other income during the year.
| Computation of Income | Amount |
| Income from Other Sources | 15,00,000 |
| Total Income | 15,00,000 |
| Tax @ 30% (special rate) | 4,50,000 |
| Education Cess | 13,500 |
| Total Tax | 4,63,500 |
| T.D.S. | 4,50,000 |
| Tax Payable (excluding interest and rounding off u/s 288, if any) | 13,500 |
Example: Mr. X wins Rs 4,00,000 cash from the lottery. TDS of Rs 1,20,000 has been deducted on such receipt. He has made a payment of Rs 50,000 towards LIC. He has no other income during the year.
| Computation of Income | Amount |
| Income from Other Sources | 4,00,000 |
| Total Income | 4,00,000 |
| Tax @ 30% (special rate) | 1,20,000 |
| Education Cess | 3,600 |
| Total Tax | 1,23,600 |
| T.D.S. | 1,20,000 |
| Tax Payable (excluding interest and rounding off u/s 288, if any) | 3,600 |
Example: Mr. X wins Rs 4,00,000 cash from the lottery. For earning such income he purchases ticket worth of Rs 20,000. TDS of Rs 1,20,000 has been deducted on such receipt. He has made a payment of Rs 50,000 towards LIC. He has no other income during the year.
| Computation of Income | Amount |
| Income from Other Sources | 4,00,000 |
| Total Income | 4,00,000 |
| Tax @ 30% (special rate) | 1,20,000 |
| Education Cess | 3,600 |
| Total Tax | 1,23,600 |
| T.D.S. | 1,20,000 |
| Tax Payable (excluding interest and rounding off u/s 288, if any) | 3,600 |
Example: Mr. X wins Rs 9,000 in cash from the lottery. No TDS has been deducted on such receipt. He has made a payment of Rs 50,000 towards LIC. He has no other income during the year.
| Computation of Income | Amount |
| Income from Other Sources | 9,000 |
| Total Income | 9,000 |
| Tax @ 30% (special rate) | 2,700 |
| Rebate u/s 87A | 2,500 |
| Gross Tax | 200 |
| Education Cess | 6 |
| Tax Payable (excluding interest and rounding off u/s 288, if any) | 206 |
