When you win the Lottery, you will not get the exact amount you win. You have to pay some tax on the winning amount. It is taxable to give away Lottery, game show, or talent show income, and TDS is deducted before getting the actual amount. A tax of 30% is imposed on non-approved awards and prizes. The total tax rate would be 31.2% if Cess were added to the tax rate.
No matter what tax bracket the individual falls into, this rate would always be the same. Even if a taxpayer’s income is within the 20% rate limits, gains from prizes and awards are still subject to income tax at 31.2%.The market value of an item received as part of the prize is considered if a bonus is in kind. Afterwards, the thing is taxed according to its market value. The tax rate is same for all types of lottery including Shillong, Arunachal, Khanapara, Night, Juwai etc.
Tax Details on Lottery
If the prize money exceeds INR 10,000, TDS is deducted at 31.2% u/s 194B before the winner receives the prize money. The winner’s income is not taxable, regardless of whether it is taxable or not. Taxes are due at the time of payment by the prize distributor. TDS applies to horse race winnings exceeding INR 10,000.
These winnings cannot be deducted or expended. From such income, no deduction or allowance is permitted under section 80C or 80D. This income is also not eligible for an exemption limit and a slab income tax rate. A flat rate of 31.20% will be applied to the total amount received. In case the prize or prize is above INR 10,000, TDS must be deducted before paying the prize to the winner under Section 194B.
Tax on Winning Items
The lottery distributor must ensure the tax has been paid before releasing the amount if the Lottery is given in kind, such as a car. Tax is calculated according to the prize’s market value in this instance. The total tax should be calculated on the cash and kind portions of the award when both are given. When the prize winner receives the cash portion of the prize, the amount of tax must be deducted. If the cash prize does not cover the total tax liability, either the winner or the prize distributor is responsible for paying the deficit.
When you win the Lottery, check whether the government approved it. You do not have to pay taxes if the government supports the award. Otherwise, you will have to be paid tax if it is not approved. Make sure you understand the implication of taxation and the amount of tax owed to avoid paying income tax penalties.
We have tried to give you the necessary information regarding the taxation on Lottery and hoping that now you have got the answer to the query, What is the tax on lottery winnings? If you have any other questions or queries, don’t hesitate to reach us in the comment section.
Your lottery gains will be submitted to a 25% IRS tax, you see a Rupee. Depending on where you live, you may be charged up to an additional 13% in state and local taxes. Since the top federal tax rate is 37%, you will likely owe more when taxes are due.
If you are a resident of India, then no. The Resident’s income is taxable in India regardless of receiving it. Despite this, benefits will be allowed for income tax paid in foreign countries as per the DTAA or section 90/90A.
Tax Refund on TDS: Usually, taxpayers receive a tax refund if their TDS liability exceeds their TDS portion for a given financial year. This TDS amount cannot be refunded to taxpayers in the case of such winnings.