Section 194G TDS on Lottery Commission – Applicability, Time & Threshold

Introduction

Section 194G of the Income tax act which mandates the deduction of tax deducted at source (TDS) on income earned in relation to the sale of lottery tickets which includes commission, remuneration or any prize received by a person engaged with the business of stocking, distributing, purchasing or selling of lottery tickets. When a lottery ticket seller claims on unsold tickets or earns income in the form of commission or remuneration for selling lottery tickets such income becomes taxable in their hands.

In Simple terminology, Section 194G requires the persons who is paying any income by way of commission or remuneration or prize on lottery tickets to the person who has been stocking distributing, purchasing, selling the lottery tickets to deduct TDS.

Applicability of Section 194G

This section is mainly applicable to those persons who are either distributors, purchasers or seller receiving income in the form of commission, remuneration or prize on the sale of lottery tickets are liable to pay taxes. The person who is paying such income is liable to deduct taxes. 

Any person responsible for paying any income by way of commission, remuneration or prize (by whatever name called) on lottery tickets to any person who is stocking distributing purchasing or selling such tickets.

The deductor is liable to deduct TDS only if the amount exceeds 15,000 now 20,000 in Financial Year 2025-26.

• Deductor – Any person responsible for paying any income by the way of commission, remuneration or prize (by whatever name called) on stocking, distributing, purchasing or selling lottery tickets shall be responsible to deduct tax at source.
• Deductee – The recipient can be a resident or non-resident. For example: Mr A (a lottery distributor) receives commission of 50,000 from lottery organizer.

Rate of TDS us 194G

1. The deductor is liable to deduct TDS at the rate of 5%
2. No surcharge and educational cess will be levied on the above of TDS prescribed rate
3. If the deductee has not quoted his PAN the the rate of TDS will be 20%.

Time of Deduction of TDS

In case the deductor is liable to deduct TDS as per provisions of section 194G of the income tax act 1961 then the deductor is required to deduct TDS within earlier of the following prescribed dates at the time of payment in cash, cheque, draft any other mode or at the time of credit of income to the account of the payee. 

Exemption limit under section 194G

The deductor would liable to deduct TDS under section 194G only of the income amount exceeds 20,000. In other words, the exemption limit specified under section 194G is 20,000 and TDS would be deductible only above that.

Section	Nature of payment	Threshold limit	Payer	Payee	Rate if TDS	Time of Deduction
194G	Commission on sale lottery tickets	15,000 (20,000 from F.Y 2025-26) in a Financial Year	The person responsible for paying income by way of remuneration or (by whatever called) on lottery tickets	Any person stocking, distributing, purchasing, selling lottery tickets	5% (till 30th September 2024) and now 2% (i.e. 1st October 2024)	At the time of credit of such income to the account of the payee or at the time of payment whichever is earlier

Deposit of TDS 

Tax deducted by an office of government 

• Without an income tax challan – deposit on the same day
• With an income tax challan – deposit within 7 days from the end of the month in which the deduction is made

Other deductors

• If credited or paid in march 30th April 
• Any other – within 7 days from the end of the month in which the deduction is made.

Quarterly Statement filing (rule 31A) & furnishing certificate of TDS (Rule 31)

• Payer must submit a quarterly statement (form 26Q) for tax deducted at source
• Payer must furnished certificate of TDS in from 16A within 15 days from the due date for furnishing TDS statement.

Quarterly	Due date for statement Filing	Deadline for issuing Certificate
April – June	31st July	15th August
July – September	31st October	15th November
October – December	31st January	15th February
January – March	31st may	15th June

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Sandeep Ghatuary

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