Everyone in this world wants to become a crorepati and win lakhs and crores of prize money on TV game shows such as Kaun Banega Crorepati (KBC), Chappar Phad Ke, Khulja Sim Sim, and Dus Ka Dum, among others. If one has some singing or dancing talent, then one would like to be a winner of, say, Indian Idol or India’s Best Dancer.
However, have you ever wondered whether that prize money is tax-free or one has to pay some tax on that? And if one is required to pay tax on such winnings, then how much tax one has to pay? Is it as per the income tax slabs or is there a fixed rate for it? Here we are trying to find out the answers to these queries.
According to tax experts, income by way of winning from lotteries, crossword puzzles, card games and other games of any sort, or from gambling or betting of any form or nature whatsoever is taxable under Section 56(2)(ib) of the Income Tax Act, 1961.
‘Other game of any sort’ includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes. “Accordingly, income from KBC TV shows and online gaming is taxable as ‘income from other sources’ under Section 56 of the I-T Act. Such income is taxable at a flat rate of 30% plus applicable surcharge and cess as per Section 115BB,” says Sudhakar Sethuraman, Partner, Deloitte India.
Thus, income from KBC, TV Shows and online gaming forms part of the Income from Other Sources and is taxable under the head Income from Other Sources.
“Provisions of Section 115BB of the Income Tax Act, 1961 govern the tax rate and the procedures. Under Section 115BB, a tax rate @ 30% + Surcharge (if applicable) + 4% Cess are charged on such income. Income from such winnings is liable to a flat rate of tax at 30% without any basic exemption limit. In general, the payer or disburser of prize money deducts tax at source (i.e., TDS) from the winnings under Section 194B and pays only the balance amount to the winner. No deduction of any expenditure or allowance in connection with such income is allowed while computing such income,” says Kapil Rana, Founder & Chairman, HostBooks Ltd.
It may also be noted that no benefit of basic exemption limit is allowed while calculating the tax dues on this income. Also, no deduction under chapter VI-A or for any expenditure can be claimed. Further, losses brought forward from earlier years cannot be set off against such income.
“Where the income exceeds Rs 10,000, the same is subject to tax withholding by the payer at the rate of 30% as per section 194B,” says Sethuraman.
In case the winning contestant is being awarded money in cheque, cash, DD (demand draft) or online transfer, among others, such payment will be made after deduction of tax at applicable rates.
“In case the winner is being awarded a gift in kind, the winner would be required to estimate the value of such payment and then pay the required tax from his/her own pocket. In case the winner diverts a certain percentage of such winning in favour of the government or an agency conducting such lottery, then such amount will not be taxed in the hands of the winner,” says CA Karan Batra, Founder & CEO of CharteredClub.com.
