The cash obtained is taxable below the heading Income from Other Sources. (Representative picture)
The provisions governing the Income-tax are lined within the Income-tax Act, 1961.
In India, prize cash and lottery winnings are topic to tax below the Income Tax Act, 1961. The tax price on prize cash and lottery winnings is 30% of the entire winnings, and it’s relevant to each resident and non-resident winners.
It is vital to notice that the tax is deducted at supply by the entity awarding the prize cash or lottery winnings. Therefore, the winner receives the quantity after deducting the tax on the relevant price.
What is income-tax?
It is a tax levied by the Government of India on the revenue of each individual. The provisions governing the Income-tax are lined within the Income-tax Act, 1961.
Who is meant to pay Income-tax?
Income-tax is to be paid by each individual, except exempted by legislation. The time period ‘person’ as outlined below the Income-tax Act below part 2(3) covers in its ambit pure in addition to synthetic individuals.
For the aim of charging Income-tax, the time period ‘person’ contains Individual, Hindu Undivided Families [HUFs], Association of Persons [AOPs], Body of people [BOIs], Firms, LLPs, Companies, Local authority and any synthetic juridical individual not lined below any of the above.
Thus, from the definition of the time period ‘person’ it may be noticed that, other than a pure individual, i.e., a person, any type of synthetic entity will even be liable to pay Income-tax.
If you win a lottery or prize cash in a contest, do you have to pay income-tax on it?
Yes, based on the Income Tax Act, such winnings are liable to flat price of tax at 30% with none primary exemption restrict. In such a case the payer of prize cash will usually deduct tax at supply (i.e., TDS) from the winnings and can pay you solely the steadiness quantity.
The cash obtained is taxable below the heading “Income from Other Sources”.
Section 194B of the Indian Income Tax Act, 1961 deals with the TDS on lottery winnings, card games, TV shows, crossword puzzles etc..
According to this section, any person who is responsible for paying any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort in an amount exceeding Rs. 10,000 is required to deduct TDS at the rate of 30% before making the payment to the winner.
Apart from the above rate, after adding surcharge and cess, the applicable TDS becomes 31.2%.
It is important to note that failing to pay the applicable taxes on lottery or prize money winnings can result in penalties and legal consequences. Therefore, it is advisable to consult a qualified tax professional for guidance on your specific situation.
How does the Government collect income-tax?
Taxes are collected by the Government through three means:
a) voluntary fee by taxpayers into numerous designated Banks. For instance, Advance Tax and Self Assessment Tax paid by the taxpayers,
b) Taxes deducted at source [TDS] from the income of the receiver, and
c) Taxes collected at source [TCS]. It is the constitutional obligation of every person earning income to compute his income and pay taxes correctly.
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