TDS on winnings from lotteries, crossword puzzles and horse races (Section 194B and 194BB) | AY 2019-20 onwards

Taxability of casual income

As per section 115BB of Income Tax Act, 1961,  any income of a casual and non-recurring nature of the type of winnings from lotteries, crossword puzzles, card game and other game of any sort, races including horse races, etc. will be charged to income-tax at a flat rate of 30%.

TDS on winning from lotteries, crossword puzzles etc.

According to the provisions of section 194B, every person responsible for paying to any person, whether resident or non-resident, any income by way of winnings from lottery or crossword puzzle or card game and other game of any sort, is required to deduct income-tax therefrom at the rate of 30% if the payment exceeds Rs 10,000/-

If winnings are partly in kind and partly in cash

In a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings.

Person responsible for deduction of tax under section 194BB

Section 194BB casts responsibility on the following persons to deduct tax at source -

• a bookmaker; or
• a person to whom a license has been granted by the Government under any law for the time being in force -
  • for horse racing in any race course; or
  • for arranging for wagering or betting in any race course.

Threshold limit and rate of TDS under section 194BB

The obligation to deduct tax at source under section 194BB arises when the above mentioned persons make payment to any person of any income by way of winnings from any horse race in excess of Rs 10,000/-. The rate applicable for deduction of tax at source is 30%.

Tax will have to be deducted at source from winnings from horse races even though the winnings may be paid to the person concerned in installments of less than  Rs10,000 . Similarly, in cases where the book-maker or other person responsible for paying the winnings, credits such winnings and debits the losses to the individual account of the punter, tax has to be deducted @30% on winnings before set-off of losses. Thereafter, the net amount, after deduction of tax and losses, has to be paid to the winner.

Meaning of the expression “horse race”

In the context of the provisions of section 194BB, the expression ‘any horse race’ used therein must be taken to include, wherever the circumstances so necessitate, more than one horse race. Therefore, winnings by way of jack pot would also fall within the scope of section 194BB.