Section 194B

TDS is withheld when money is received from winning lotteries, card games, quiz shows, card games, internet gaming, & dancing competitions, as per Section 194B of Income Tax Act. amount of money won from games must exceed Rs. 10,000.

What Is Section 194B Of Income Tax Act?

194B of income tax act states that before making payment, person must pay lottery tax & other expenses. When profits surpass ten thousand Rupees, it becomes applicable.
Additionally, there may be instances where awards are entirely or partially in kind. payer must keep onto wins until payee gives him same amount of cash if there is insufficient cash on hand to cover TDS. 
As alternative, payee could pay relevant TDS & give payer evidence of payment.
 

Who Is Responsible For Deducting TDS Under Section 194B?

Any of following prizes or awards are subject to 194b of income tax act:

• Raffles or online & offline lotteries,
• Survey,
• Questions using crosswords,
• Online & off-line betting
• Games of cards,
• Betting (both online & off),
• TV programs, such as game shows, quiz shows, dance competitions, singing competitions, & so forth.
• Sports fantasy.

If prize or earnings exceed ₹10,000, person paying prize money—typically one organizing lottery, crossword puzzle, game shows, dance competitions, etc.—is required by Section 194B to deduct TDS.
 

What Is Threshold Limit For TDS Deduction Under Section 194B?

Under Section 194B of I-T Act, 1961, maximum tax exemption on tax deductible at source is ₹10,000.

What Is TDS Rate Under Section 194B?

Thirty percent of actual winning amount or value is rate of TDS that applies to income under Section 194B. This means that appropriate tax deducted at source is 31.2% when surcharge & cess are taken into account.
However, in addition to standard TDS rate of 30%, non-resident deductees are also subject to 4% cess.
 

Documentation Required For TDS Deduction Under Section 194B

• TDS deduction will be made at proportionate rate on each instalment if prize money is paid out in instalments. 
• Players & participants in these activities are required to give organizer their bank account information & PAN.
• Refunds for TDS payments made in accordance with Section 194B are not available.
   

How Is TDS Amount Calculated Under Section 194B?

For taxation purposes, revenue from game shows & lotteries is counted separately from other sources of income. These types of wins are categorized as "Income from other sources." 

Assume Sanjay has won ₹10,000,000 from game show on television. After deducting all tax exemptions, his business's taxable income comes to ₹8,00,000. He will no longer have to include TDS on his game show profits in addition to his ₹8,00,000 taxable income. As of right now, income up to ₹ 3 lakh is tax-free. rate of 5% is applied to income between ₹ 3 & ₹ 6 lakh, & rate of 10% is applied to income between ₹ 6 & ₹ 9 lakh.

According to his income tax bracket, his income tax obligation will be determined by adding 10% of his income beyond ₹ 6 lakh, or ₹2 lakh, to ₹ 15,000 (or 5% of ₹3 lakh). Thus, Sanjay will owe income tax of ₹ 15,000 plus 10% on ₹2 lakh, or ₹ (15,000 + 20,000) = ₹35,000.

On his game show winnings of ₹10,000,00,000, however, 31.2% rate will be applied locally. Therefore, ₹3,12,000 will be TDS amount on his gains. Hence, Sanjay will actually have made ₹ (10,000,000-3,12,000) = ₹ 6,88,000. From game show.

Penalty For Non-Compliance Under Section 194B

Prior to disbursing winning sum to winner, payor is required by Section 194B of Income Tax Act to deduct tax at source. If tax is not withheld at source at appropriate rate, there is minimum sentence of three months & maximum sentence of seven years in prison. Furthermore, there can potentially be fine applied.

Conclusion

Section 194B of Indian Income Tax Act outlines tax obligations on various types of winnings. Lottery winnings tax applies to prizes won from lotteries, while crossword puzzle winnings & card game winnings tax are also covered under this section. Gambling income tax extends to all gambling-related earnings. Tax on game show winnings ensures that prizes from televised contests are taxed. income tax on lottery specifically addresses taxation of lottery prizes. Prize money tax encompasses all forms of prize winnings. Deduction of tax at source on winnings (TDS on lottery winnings) mandates that taxes are deducted before prize money is distributed to winner. Section 194B thus comprehensively governs taxation of various forms of winnings, ensuring proper tax compliance.