Under Section 194B of the Income Tax Act, TDS will be deducted when the income is earned from the winning lotteries, card games, quiz shows, card games, online gaming, and dance competitions. The winnings from the games need to be more than Rs. 10,000.
If someone has won a game, a competition, or a lottery, they will have to know about Section 194B and TDS on winning from the lottery.
According to sec 194b of the income tax act, a person will be responsible for paying lottery tax and more before making the payment. It is applicable when the winnings exceed ten thousand Rupees.
There could also be cases when the winnings are partly in kind or fully in kind. When the cash balance is not enough to deduct TDS, the payer is accountable for withholding the winnings until the payee pays him an equal amount of cash.
Alternatively, the payee could pay applicable TDS and submit the proof of payment to the payer.
Lottery, television, and internet game winners are required to collect and deposit the TDS amount at the time of payment to the Government.
Here is the list of the sources that will be subject to a 31.2 per cent flat tax:
Any bonus or commission provided to lottery agents, sellers of lottery tickets, or sales made by them out of lottery winnings, etc., is not subject to income tax withholding; instead, tax is withheld after subtracting the bonus and commission.
If a person who is responsible does not deduct the tax, then they would have to pay the penalty that is as much as the amount of tax that has to be deducted. The deductor would need to deposit the tax deducted to the Government. If not, it could lead to imprisonment for a minimum of 3 months to 7 years or a fine.
For IRS purposes, winnings from lotteries and game shows are counted separately from your other income. Such winnings fall under the category of "Income from other sources."