Section 194G- TDS on Commission on Sale of Lottery Tickets

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Any income earned by a person in the form of commission, remuneration, or prize on lottery tickets (deductee) who has been selling lottery tickets (also stocking, distributing, and purchasing) is liable to pay taxes.

  1. Time of Deduction- TDS to be deducted at the time of credit or payment, whichever is earlier.
  2. Deductor- Any person responsible for paying any income by way of commission, remuneration or prize (by whatever name called) on stocking, distributing, purchasing, or selling lottery tickets shall be responsible to deduct tax at source.
  3. Deductee- The recipient can be a resident or non-resident.
  4. TDS Rate- TDS at a rate of 5% shall be applicable if the income is more than Rs. 15,000.
  5. Cases when TDS shall be deducted at a lower/Nil rate- The assessee case make an application in Form No. 13 to the Assessing Officer and obtain from him such certificate as may be appropriate authorizing the payer to deduct TDS at nil rate or at lower rate.
˜Authored by – CA Anushka Saraogi˜

Allocation of Interest in TDS Returns

 

Section 194DA- TDS on maturity payment in respect of Life Insurance Policy

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TDS needs to be deducted on maturity payment in respect of life insurance policy.

  1. Time of Deduction- TDS to be deducted at the time of payment.
  2. Deductor- Any person who makes a payment should deduct TDS
  3. Deductee- The payment of interest should be made to a resident. If payment is made to a non-resident, TDS shall be deducted under section 195.
  4. Tax Rate- TDS at a rate of 5% shall be applicable if the aggregate amount exceeds more than Rs.1,00,000 in one FY.

If PAN is not furnished, then tax to be deducted at a higher rate.

  1. Example: For example, consider Mr Venkat received a maturity amount of Rs 7.5 lakh from his life insurance policy. Mr Venkat has paid an amount of Rs 2.5 lakh as a premium for the policy over a period of 10 years.

In this case, the maturity amount is above Rs 1 lakh. Hence, the maturity proceeds will be paid after deducting 5% TDS on Rs. 5 lakh). After deduction, Mr V will receive Rs. 7,25,000.

  1. Cases when TDS shall not be deducted-
    • If TDS on amount exempt under Section 10(10D)
    • If declaration is given under Sec 197A
  2. Sec 10 (10D): According to section 10 (10D), any sum received under the LIC policy including the amount of bonus is exempted. This section has following exemptions to it:
    • Any amount received under section 80DD (3) or 80DDA (3).
    • Any amount received under keyman insurance policy.
    • LIC policy is bought after 1st April 2003 but before 31st March 2012 and premium is more than 20% of the sum assured.
    • LIC policy is bought after 1st April 2012 and the premium paid is more than 10% of sum assured.
    • LIC policies bought for persons with disability or severe disability according to section 80U, or for individuals suffering from ailments covered under section 80DDB after 1st April 2013, and the premiums are more than 15% of sum assured.
    • There is no ceiling limit for claiming exemption under section 10(10D) unless above mentioned conditions are satisfied.
˜Authored by – CA Anushka Saraogi˜

Section 194B: TDS on Winnings from Lottery, Game Shows etc…

TDS Under Section 194J(a) & 194J(b)

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The existing section code 194J (i.e. Fees for Professional or Technical Services) has been sub-divided now into two sections, 194J(a) and 194J(b), effective from August 7 2020. u/s 194J(a) of the Income Tax Act, is related to TDS deduction on fees for Technical Services, and u/s 194J(b) of the Income Tax Act is related to TDS deduction on fees for Professional Services. Every person excluding an individual or a HUF, making payment to a resident for notified services, will be covered u/s 194J(a) & 194J(b) in the Income Tax Act.

  • Payments that are being covered u/s 194J(a)

– Fees for Technical Services
– Call center
– Royalty for sale
– Distribution or exhibition of cinematographic films etc..

  • Payments that are being covered u/s 194J(b)

– Professional services
– Royalty etc…

  • Tax Deduction Rate

– Tax deduction rate for u/s 194J(a) is 2% and for 194J(b) is 10%
– In case of payee fails to furnish PAN, he will be liable to pay TDS at the rate of 20%

  • Threshold Exemption Limit

In case of payment does not exceed the directed Threshold exemption limits, TDS will not be deductible.
TDS is required to be deducted if the amount of payment in a year exceeds Rs. 30,000.
However, Threshold exemption limit is not available only in the case of Fees / Commission / Remuneration paid to director of the company, other than Salary.

Allocation of Interest in TDS Returns

Section 194B: TDS on Winnings from Lottery, Game Shows etc…

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TDS shall be deducted on winnings from lottery, game shows and puzzles by the prize distributor.

1.  Applicability: Winning amount needs to be more than Rs 10,000

2.  Deductor: Prize distributor can be any person and shall deduct the TDS at the time of  payment

3.  TDS Rate: TDS at a flat rate of 30% shall be applicable on such income.

4.  Nature of Win: Winning can be in form of cash or kind. TDS needs to be deducted on both these components. Market value of the prize needs to be assessed and tax needs to be deducted on the assessed amount

5.  Points to Note:

    • TDS u/s 194B shall be deducted on the net winnings i.e. after considering bonus/commission paid to lottery agent
    • Deduction/expenditure shall not be allowed on such income to the prize recipient
˜Authored by – CA Anushka Saraogi˜

Section 194N – TDS on Cash Withdrawals