Section – 194B Wining from Lotteries or Crossword Puzzle etc.

Section 194B is a rule that applies TDS on winnings from games like lottery or crossword puzzle. TDS means that if you win a game, lottery or puzzle, then whatever prize you get, tax will be deducted from it in advance.

Sections 194B applies to winnings you win through games of chance (i.e., games where luck plays a part). Some examples are –

Lottery (If you bought a lottery ticket and won) or Gambling or Betting
Crossword puzzle (If you won a crossword puzzle competition)
Card Games Like Raffles (If your ticket was randomly selected)
TV Shows like quiz shows, dance & singing competition etc. (If you won a TV Shows competition)

Section - 194B

194B proviso

Winnings from lotteries and crossword puzzles, etc. where consideration is made in kind or cash is not sufficient to meet the tax liability and tax has been paid before such winnings are released (Applicable From 01-July-2022)

194 BA - TDS on winning from online games
194 BB - TDS on winning from horseraces

Note:

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 wining, ensure that tax has been paid in respect of the winnings.
Where winnings are to be credited and losses are to be debited to the individual a/c of the punter, tax has to be deducted on winnings before setoff of losses. Thereafter, the net amount, after deduction of tax and losses, has to be paid to the winner.

Threshold limit of TDS Sec 194B

TDS is applicable only when your winnings are Rs. 10,000 or more. If you win less than Rs. 10,000 TDS is not deducted. If you win Rs. 10,000 or more. TDS is deducted. If you win less than Rs. 10,000 is not applicable.

Note: Winning Prize can be either cash or consideration other than cash.

What is the rate of TDS?

The rate of TDS is 30%. This rate is in addition to surcharge and cess. Meaning 30% tax will be deducted on the amount you win.

For example,

You won a lottery of Rs. 15,000
TDS rate of 30%
TDS will be deducted = Rs. 15,000 * 30% = Rs. 4,500
Amount you will receive = Rs. 15,000 – Rs. 4,500 = Rs. 10, 500.

When to to Deduct TDS?

Responsibility of Organizers – The responsibility of deducting TDS lies with lottery organizers or puzzle providers. If you win the lottery, then the company of person who runs the lottery has to deduct TDS.

TDS deduction Example – Suppose, you won a lottery of Rs. 20,000 Then

Organizers will deduct 30% TDS from Rs.20,000
TDS Deducted = Rs. 20,000 * 30% = Rs. 6,000
You will get = Rs. 14,000

You will see this process every time at the time of winnings.

What happens is TDS is not Deducted?

If the organizer does not deduct TDS, then the tax authorities do not get that money and you have to show it in your income tax return. You may also be at risk of penalty or interest if TDS is not deducted correctly.

How TDS adjusted in Income Tax Return?

TDS deducted Certificate: When TDS is deducted, you are given a TDS certificate. This certificate is for your records, which states how much TDS has been deducted on your winnings.
Tax filing – while filing your income tax return (ITR), you have to adjust this TDS in your total income. If TDS has been deducted, you can get a refund from the tax authorities if your total tax liability is more. If you have paid less tax, you will have to pay additional tax.

Example of filing the return, suppose you won Rs. 20,000 and Rs. 6,000 TDS was deducted. When you file your income tax return, you will show Rs. 6,000 TDS as tax payment. If your total tax liability is Rs. 5,000 you can get Rs. 1,000 refunds, because you have already paid Rs. 6,000 as tax. If your liability is Rs. 7,000 you will have to pay Rs. 1,000 additional taxes.

What Happens if winnings are less than Rs. 10,000?

If you win less than Rs. 10,000 (for example Rs. 8,000 or 9,000), then TDS does not apply, you will get the full amount and you will have to show that amount in your income tax return. For example, you won a lottery of Rs. 9,500 the no TDS to be deducted, you will get the full amount of Rs. 9,500.

Section – 194B Wining from Lotteries or Crossword Puzzle etc.