Income tax for lottery winners & commission on sale of lottery: Here is what you should know
One has to pay income tax on winning lotteries under Section 194B of the Income Tax (I-T) Act, 1961.
The income that a person earns through lotteries such as (lottery winning, crossword puzzles, horse racing, etc.) are known to be casual incomes and it is different for both the Indian citizens and NRIs. The taxes on casual income are paid on an advance basis.
But, there are also a few more criteria and exemption that one needs to understand before filing Income Tax Return (ITR) . According to the Income Tax Department, advance tax is payable on total income which includes capital gains and casual income (i.e. income from lotteries, puzzle, game shows, etc.)
If one receives money from winning the lottery, Online/TV game shows, puzzle, horse racing, etc., it will be taxable under the head of Income from Other Sources. The income will be taxed at 30% which will go up to 31.2% adding cesses under Section 194B. Further, TDS is applicable if the prize money exceeds Rs 10,000. The TDS is deducted is also charged after the income tax is levied. In the case of income gained through the horse racing, TDS will be applicable if the income exceeds Rs 5,000.
One cannot claim deduction under Section 80C (Deductions on Investment) or 80D (Medical Insurance) for such income.
While there is a 5% tax applicable on commission on the sale of lottery tickets under Section 194G of the Income Tax Act. However, no TDS is required to be deducted where the amount of such payment does not exceed Rs 15,000.
But for NRIs income gained from winning lotteries, game shows, etc., the tax rate starts from 34.32%, whereas, the tax applicable for a commission on the sale of lottery tickets, the taxable rate starts from 5.72%.As per the department, no losses can set off against the income earned under Section 194B or 194G.