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People think of a lottery ticket as only a fortune bag bringing in money. However, not everyone is aware of the tax liability that comes along with the fortune bag. Section 194G provides for the particulars of TDS on the purchase, distribution, and other activities associated with lottery tickets. Let’s discuss section 194G in detail:

  1. Scope of Section 194G
  2. Rate of TDS under Section 194G
  3. Time of Tax Deduction under 194G
  4. Certificate of no or lower TDS under 194G

1. Scope of Section 194G

Any income earned by a person in the form of commission, remuneration, or prize on lottery tickets (deductee) who has been selling lottery tickets (also stocking, distributing, and purchasing) is liable to pay taxes. The person responsible for making such payment (deductor) for an income exceeding Rs 15,000 must deduct an income tax.

2. Rate of TDS under Section 194G

A tax deduction of 5% will be made at the source for such income. No charges such as surcharge, education cess, and SHEC will be levied on the specified rate. If PAN is not quoted by the deductee, a tax deduction rate of 20% will be applicable.

However, tax cannot be deducted in the case of payment does not exceed Rs 15,000.

3. Time of Tax Deduction under 194G

Tax on income from lottery tickets can be deducted at the time of income credit to the deductee’s account or at the time of payment in cash, cheque, draft, or other payment methods, whichever is earlier.

Irrespective of such income being credited to a ‘suspense account’ or any other account as per the books of account of the deductor, it is considered to be a payment made to the deductee’s account and the provision of the section is applicable.

4. Certificate of no or lower TDS under 194G

You can request the assessing officer (AO) via Form no. 13 and get a certificate that authorises the payer to make nil tax deduction or deduction at a lower rate. To get the benefits of such a facility, it is mandatory to quote your Permanent Account Number (PAN) as per Section 206AA(4).

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