The tax bite on jackpots: What lottery and game show winners must know?

Winning crores feels thrilling, but taxes slash the prize sharply. Here's an explanation how TDS, surcharges and cess reduce your lottery or game show windfall

If you strike big on a TV game show or win the lottery, the celebrations are often dampened by tax. Under the Income-tax Act, winnings from lotteries, crossword puzzles, horse races, betting, card games and television contests are taxed at a flat rate of 30 per cent, plus cess and surcharge.

 

“These winnings are taxed differently from salary or business income, as no deductions are allowed in computing winnings from lottery or game shows,” said Jimmy Bhatt, partner at Khaitan & Co.

 

S R Patnaik, partner and head of taxation at Cyril Amarchand Mangaldas, pointed out that while regular income such as salary is taxed as per slab rates, Section 115BB of the Act mandates a flat 30 per cent on winnings, with no allowances or expenses permitted as deductions.

 

Adding further clarity, Ritika Nayyar, partner at Singhania & Co, explained, “The effective rate comes to 31.2 per cent after cess, and a surcharge may apply for winnings above Rs 50 lakh or Rs 1 crore. No set-off of losses is allowed, unlike in regular income.”

How TDS apply on winnings?

For winnings above Rs 10,000 in a single transaction, organisers must deduct tax at source (TDS) at 30 per cent before handing over the prize, However the threshold of INR 10,000 doesn’t apply to online games.

 

Bhatt noted that in some cases, the entry fee or buy-in amount may be reduced to compute the winnings for TDS purposes, although this relief does not extend to online games.

 

Patnaik emphasised the need to disclose such income under “income from other sources” in the income tax return, while Nayyar added that organisers must issue a Form 16A TDS certificate, and winners should verify the tax credit in Form 26AS to ensure compliance.

 

No exemptions or deductions

 

Unlike business or salary income where deductions under sections such as 80C or 80D may apply, no such relief is available here. “The flat tax rate applies regardless of your income, and you cannot offset any losses against such winnings,” Nayyar stressed.

 

To illustrate, if you win Rs 1 crore on a TV game show:

 

·  Patnaik’s calculation: Factoring surcharge and cess, the effective tax rate rises to 35.88 per cent. The winner takes home around Rs 64.12 lakh.

 

·  Nayyar’s view: With flat 30 per cent TDS plus 4 per cent education cess, net winning proceeds received by winner will be Rs 68,80,000. While at the time of filing ITR, factoring in 30 per cent tax, 10 per cent surcharge, education cess 4 per cent, the final take home money by the winner will be Rs 65,68,000.

 

Whether it’s a jackpot, a reality show prize, or a lucky lottery draw, over a third of the prize money goes to the taxman. Winners should plan accordingly, retain certificates for proof, and disclose the income accurately to stay compliant.