Tax on Winnings of Game Shows and Lottery

Tax On Winnings of Game Shows and Lottery

Nowadays there are several game shows – from the pioneering show Kaun Banega Crorepati (KBC) to Fear Factor – and reality shows such as Indian Idol, Roadies, Sa Re Ga Ma Pa and Dance India Dance and DREAM 11 and JungleeRummy.

All these shows come with a large prize money – running into crores – or prizes such as a house or car. If you’ve every envied your neighbour for winning anything in shows and lucky draws, remember that the entire amount does not come into the winner’s hands. Any money or prize you win from a game show, reality show or lottery, is subject to tax deduction at source (TDS).

The Income Tax Act, 1961 specifies in Section 56(2)(ib) the ‘Income From Other Sources’ that are taxable. The Finance Act 2001 amended the description of games in relation to taxation – after KBC was launched in 2000 – to include television and electronic (online) game formats.

Under Section 194B, winnings from the following sources are subject to TDS of 30%:

  • Lotteries and lucky draws
  • Races
  • Card games, gambling or betting
  • Crossword puzzles
  • TV or electronic competitive game shows

There is also a 4% education cess on this 30% tax. This brings the total tax on game show winnings to 31.2%. An additional 10% surcharge is also applicable on the winning amount if the amount is more than the applicable limits.

This TDS has to be deducted by the person or organisation responsible for paying the prize money to the winner.

Points of note on Taxation of Game Show Winnings

The following points are worth remembering in relation to TDS on prize money:

  • Everyone – irrespective of their regular income, the amount of winnings, age or physical condition – has to pay a tax of 31.2%.
  • The TDS of 31.2% is a flat tax on the winning amount; it will not be added to your income and you will not be able to benefit from your income tax rate slab.
  • The prize money will be considered as separate from your income, and your regular income will be taxable as per your income tax rate slab.
  • You do not get any deduction or exemption on tax in the case of game show prizes – even if you invest the prize money in any of the savings instruments mentioned under Sections 80C to 80U.
  • If your winnings are in the form of a car or jewellery or apartment or any moveable or immovable asset, then you have to pay the TDS of 31.2% to the government before claiming the prize.
  • For example, if you have won a car worth Rs. 8 lakh in a game show, you have to pay to the taxman Rs. 2,47,200 before you can drive the vehicle home. If you cannot afford to pay the amount, you may have to forsake the prize!
  • The only exception to taxation on game show winnings is that you do not have to pay tax on the amount that you donate – partially or wholly – either to the government or back to the agency conducting the lottery/game show.

Input Tax Credit under GST – Important Points

With the surge in litigation surrounding the incorrect availment of Input Tax Credit (ITC) under the Goods and Services Tax (GST) regime, it’s imperative for GST registered buyers to adhere to certain guidelines. This article outlines essential pointers that buyers must keep in mind while availing ITC to ensure compliance and mitigate the risk of disputes and penalties.

Possession of a tax invoice or debit note:
Buyer must have possession of tax invoice and debit note. Further please note that tax invoice or debit note should have the valid field as specified in Rule 46 and Rule 53 of i. e Name, GST No, Place of supply, HSN, GST rate, invoice no not exceeding 16 digit and many more. ITC of IGST paid on import of goods cab be claimed as ITC basis Bill of entry.

ITC should be available in GSTR 2B:
Details has been furnished by supplier in GSTR 1 and same should be available in GSTR 2B of buyer.

Received of good and services:
Buyer must have received the good and services. If the goods are received in instalments, ITC can be availed when last lots or instalment is received.

Payment of tax by supplier:
Tax has been actually paid by supplier and GSTR 3B has also been furnished by supplier.

Input tax credit should not be restricted u/s 38:
ITC should not available basis various scenario as specified in section 38 of CGST Act i.e. continuous default in payment of tax by supplier, tax shown by supplier in GSTR 1 is more that tax paid in GSTR 3B etc. supplier has availed the excess ITC etc.

Payment to supplier within 180 days:
Payment to supplier should be made within180 days from the date of invoice. If payment is not made within 180 days, ITC shouldbe reversed along with interest. However, ITC can be re-availed once the payment tosupplier is made. Further, please note that there is no-time limit for re-availment of ITConce payment is made to supplier.

Due date for Availment of ITC:
Time limit to avail the ITC against invoice or debit note should be earlier of 30
November of next financial year or due date of filing the Annual return for that financial year. No ITC can be claimed beyond aforesaid dates.

Depreciation on GST portion:
No ITC will be allowed if depreciation is claimed on GST component of capital good purchased.

Blocked credit:
There are certain items that are not eligible for availment the ITC u/s17(5) of CGST Act i.e. staff welfare expenses, rent a cab services, health insurance ofemployee, membership of health & fitness center, tax has been paid under composition scheme etc.

Relaxation from TDS default if PAN and Aadhar Linked on or before 31.05.2024

The CBDT With a view to redressing the grievances faced by deductors/collectors who have collected TDS/TCS at normal rate but was required to deduct /collect at double the rate on account of PAN of the deductee being inoperative due to non linkage of such PAN with Aadhar from 1st April ,2023 has issued  a circular no 6 on 23rd April, 2024 not to treat such TDS deductors in default ( short deduction) for the tax deducted at normal rate for transactions entered into upto 31.03.2024 if in such cases the PAN of deductee is linked to Aadhar and hence becomes operative on or before 31.05.2024. 

In such cases there will  be no liability on the deductor / collector to deduct/collect the tax under section 206AA/206CC at double the rate because of PAN being inoperative due to non linkage of PAN with Aadhar and hence such deductors will not be required to pay the difference. Recently many notices have been issued to deductors for shortfall in tax deducted since PAN of deductee was found to be inoperative.

Accordingly where notices have been received for short deduction because of this reason, it will be advisable to reach out to the deductee and get his PAN linked with Aadhar immediately and in any case on or before 31st May,2024. It may be noted that this relief is for transactions up to 31st March,2024.

Accordingly for transactions on or after 1st April, 2024 make sure PAN of deductee is linked to Aadhar and valid. The facility of verification of PAN being valid is available on income tax portal.