Income Tax On Lottery Winnings And Game Show Winnings In India

Updated on: Apr 24th, 2024

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7 min read

We all are aware of the most famous game show ‘Kaun Banega Crorepati’ and numerous reality shows like Indian Idol and Dance India Dance. These shows offer huge chunks of prizes in cash as well as kind i.e. in the form of cars or houses etc. This form of income earned is taxable, and TDS is deducted before giving away lottery, game shows, or talent shows income.

Income from lottery winnings and online games are included under the head ‘Other source of Income’ and is taxable at the special rate of 30% without providing the benefit of basic exemption and deduction like 80C, 80D  etc.

Latest Update 

As per Finance Act 2023, section 194BA was introduced for any winning from online games on net winnings. TDS @ 30% will be deducted from such winnings. Rule 133 was introduced, providing clarity in the computation of net winnings in online games.

TDS Applicability On Lottery Or Game Show Income

  • If the Prize money exceeds Rs 10,000, then the winner will receive the prize money after the deduction of TDS @31.2% u/s 194B.
  • In the case of winnings from horse races, TDS will be applicable if the amount exceeds Rs 10,000.
  • No deduction/expenditure is allowed from such income.
  • No deduction under section 80C or 80D or any other deduction/allowance is allowed from such income.
  • The benefit of the basic exemption limit and income tax slab rate is also not applicable to this income. The entire amount received will be taxable at the flat rate of 31.20%.
  • For instance, if Rahul has won Rs 3 lakhs as prize money from a game show and has an interest income of Rs 5 lakhs p.a., then the tax liability would be calculated as follows: Tax on Rs 3 lakhs @ 31.2% Tax on Rs 5 lakhs as per income tax slab rates after claiming the relevant deductions.

Tax On Prize Money Received In Kind

  • If the prizes are given in kind, say a car, the prize distributor shall ensure before releasing the prize that tax has been paid. Tax is paid according to the market value of the prize given. The prize distributor can either recover from the winner or he himself can bear the burden of the tax.
  • For instance, if Suman wins an Alto car in a contest whose market value is Rs 4 lakhs, then tax @ 31.2% which is Rs 1,24,800 must be paid before the car is given to the winner.
  • In cases where the prize is given both in cash and in kind,  the total tax should be calculated on the cash portion of the prize and on the market value of the prize given in kind. And the tax amount should be deducted while giving the cash portion of the prize to the winner. But if the cash prize is not sufficient to cover the total tax liability, then either the winner or prize distributor should pay the deficit.

Tax On Winnings From Online Games

In the Finance Act 2023, a new provision of Section 115BBJ and 194BA was introduced for tax withholding on net winnings from online games. This is because of rapid growth in the online gaming industry. Online games like Dream11, Paytm First Games, Gameskraft etc have seen a rapid boom, attracting a lot of users in a short period of time.

Currently, the lower threshold for applicability of TDS is Rs 100. Thus if the net winnings are greater than Rs 100, such platforms are liable to deduct TDS under section 194BA

As per Rule 133, net winning is computed in the following manner, and TDS @ 30% is computed only on such net winnings from online games

Particular

Amount

Amount withdrawn from user account in a year

XXXX

Add: Closing balance in user account at the end of the year

XXXX

Less: Non Taxable deposit made during the year

XXXX

Less : Opening balance in the user account

XXXX

Net Withdrawal

XXXX

Joining and Referral Bonus 

Joining and referral bonuses paid to the user are not subject to tax under section 115BBJ. However, it is considered as taxable deposit and is included in the net winning based on the above formulae. Now person responsible for paying the net winning is liable to deduct TDS under section 194BA @ 30%.

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Frequently Asked Questions

Who deducts TDS from lottery or game show winnings?

TDS will be subtracted by the organisation providing the prizes/rewards before they are paid out.

Can I claim a deduction if I invest the prize money in FDs or ELSS?

No. You will not be eligible for any tax exemptions or deductions when you win money or other assets as a reward/prize through a game show or lottery. 

Do I have to pay tax if I win money from online games or Dream11?

Yes. You need to pay tax if you have won moneyfrom online games or on apps like Dream 11, Rummy Circle or any poker games. New TDS provision of section 194BA has been introduced for deduction of TDS on net winnings from online games.

Can I claim the refund of TDS under section 194B?

No, you cannot claim a refund of TDS under Section 194B, as it is a straight income tax on the income of the assessee.

Should tax be deducted under Section 194B on a bonus or commission payable to lottery agents?

No. The bonus or commission paid to lottery agents out of the winnings will not be included for the purpose of deducting tax under Section 194B.

Who should apply for a TDS certificate for tax deducted from the prize amount?

The deductor, i.e. prize distributor, will issue the TDS certificate to the winner in Form 16A under Section 194B for TDS deducted from income from winning a lottery or game.

Is set-off of losses allowed for online gaming?

Yes, a set off of losses is allowed between games. Since TDS is deducted on net winnings considering the amount withdrawn, deposited , closing and opening balance we can conclude that set off of losses is allowed between games.

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Quick Summary

Income earned from game shows, lottery, and online games is taxable at a flat rate with no deductions allowed. Latest update in Finance Act 2023 introduced TDS on online game winnings. TDS applies to prizes exceeding Rs 10,000 with a rate of 31.2%. Tax should be paid on prizes given in kind based on their market value. Online games like Dream11 are also subject to TDS on net winnings.

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