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, talent shows income.
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.
- Please note that it does not matter whether the income of the winner is taxable or not. The prize distributor is liable to deduct tax at the time of payment.
- 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 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, Rahul has won the prize money of Rs 3 lakhs from a game show and he has an interest income of Rs 5 lakhs p.a. then the tax liability would be calculated as per following: 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, then prize distributor shall ensure before releasing the prize that tax has been paid. Tax is paid as per 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, Suman has won 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 giving the car to the winner.
- In cases where the prize is given both in cash and kind, then 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.
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 money above Rs.10,000 from online games or on apps like Dream 11, Rummy Circle or any poker 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.
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