Section 194B of the Income Tax Act, 1961, mandates Tax Deducted at Source (TDS) on winnings from games of chance or skill, ensuring tax compliance at the point of payment. Below is a detailed breakdown of its provisions:
1. Applicability of Section 194B
- Covered Activities:
- Lotteries
- Crossword puzzles
- Card games (e.g., poker, rummy)
- Betting/gambling (casino, horse racing)
- TV game shows (e.g., Kaun Banega Crorepati)
- Online gaming (if not covered under Section 194BA) 16.
- Threshold: TDS applies if winnings exceed ₹10,000 per transaction(proposed change in Budget 2025: single transaction vs. annual aggregate) 7.
2. TDS Rate and Calculation
| PARAMETER | DETAILS |
| TDS Rate | 30% (flat) + 4% cess → 31.2% total 13. |
| PAN Required | If PAN not provided, TDS rate increases to 34.608% (including cess) 6. |
| Non-Cash Prizes | TDS deducted on fair market value (e.g., cars, gadgets) 310. |
Example:
- Prize: ₹1,00,000 (lottery)
- TDS: ₹31,200 (31.2%)
- Net payout: ₹68,800
3. Who Deducts TDS?
- Prize distributors(e.g., lottery agencies, game show producers).
- Online gaming platforms(for non-194BA cases) 9.
- Responsibility: Deduct TDS before payment, issue Form 16A, and deposit tax by the 7th of the next month(or April 30 for March payments) 6.
4. Key Exceptions
- No TDSif winnings ≤ ₹10,000 (but still taxable in ITR) 2.
- Exemptions:
- Prizes to government entities/RBI.
- Unclaimed prizestransferred to agents (treated as business income) 2.
5. Tax Treatment of Winnings
- Taxable Under: “Income from Other Sources” (Section 115BB).
- No Deductions: Expenses (e.g., lottery ticket costs) cannot be claimed 10.
- No Set-Off: Losses from gambling cannot offset other income 3.
6. Compliance & Penalties
- For Deductors:
- Late TDS: 1% interest/month1.
- Non-deduction: Penalty = TDS amount + prosecution (3 months–7 years)2.
- For Winners:
- Report winnings in ITR(even if TDS deducted).
- No refundof TDS under Section 194B 16.
7. Proposed Changes (Budget 2025)
- Single-Transaction Threshold: TDS triggered if any single winning > ₹10,000(removing annual aggregation) 7.
Key Takeaways
✅ Flat 31.2% TDS on winnings > ₹10,000.
✅ PAN mandatory to avoid higher deduction (34.608%).
✅ No exemptions – Full amount taxable under “Other Income”.
✅ Non-cash prizes: Taxed on market value.
