Are you confused regarding tax rules related to taxation of income generated from lotteries in Kolkata fatafat section 115BB or other Indian states’ lotteries? You are supposed to know about the following rules for taxation of such income. This is mainly because there is specific tax law regime for taxation of income from lottery winnings in section 115BB of income tax act as such lotteries income is taxed at the rate of 30%.
What is Income From 115BB?
As stated above, income from Kolkata fatafat game lottery winnings, lotteries in other states, crossword puzzle, card games, horse races, betting, gambling or gaming and TV game show, online lotteries, gambling or gaming website is considered lottery winnings and falls under tax provisions as per section 115BB of income tax act.
It means that lottery winnings income is basically a kind of windfall as such an income comes unexpectedly to you without putting much efforts unlike salary and business profit. Consequently, you should note that lottery winnings are taxable income.
Income from Lottery – Rate of Taxation
As per section 115BB, there is specific taxation of lottery winnings income as such a special tax rate of 30% is charged on lottery winnings. It is further important to know that 4% cess is applicable to lottery winnings under this provision. However, sections like 80C, 80D, and 24B cannot be taken into account as tax reliefs or deductions. Basic tax deduction allowance of ₹2.5 lakhs is not applicable on such special income under section 115BB.
Income from lottery winnings is charged to tax under section 115BB at flat rate of 30% starting from first rupee.
| Gross Winning Amount | Tax @ 30% | Health & Education Cess @ 4% | Total Tax Liability | Net Amount Received |
|---|---|---|---|---|
| ₹50,000 | ₹15,000 | ₹600 | ₹15,600 | ₹34,400 |
| ₹1,00,000 | ₹30,000 | ₹1,200 | ₹31,200 | ₹68,800 |
| ₹5,00,000 | ₹1,50,000 | ₹6,000 | ₹1,56,000 | ₹3,44,000 |
| ₹10,00,000 | ₹3,00,000 | ₹12,000 | ₹3,12,000 | ₹6,88,000 |
Tax Deduction at Source (TDS) on Lottery Winnings Income
As per section 194B of the income tax act, TDS is required in case of any lottery winnings income exceeding Rs.10,000. However, you are required to pay tax on your lottery income in case of such income less than Rs.10,000 through income tax return.
Thus, in case if you have won some money from KolkataFF game lottery then you are required to report your lottery winnings in your income tax return.
In addition, if you have won a prize in kind then your payer must deduct tax at the rate of 30% of the market value of the prize won. Recipient of the prize in kind must report income equal to TDS amount in the form of prize received. Payer may adjust the tax such that he gets the tax as well as prize in kind together.
Income Tax Return Forms (ITR)
For declaring income from lottery winnings in income tax return forms then it is necessary to complete ITR 2 or ITR 3 forms. As lottery winnings income falls in the category of income from other sources, therefore you are required to declare it in Schedule SA of these forms.
Also, verify if there are entries of lottery winnings income as well as their TDS in your AIS/Form 26AS.
Steps to Fill ITR-2 or ITR-3 for Lottery Winnings
- Verify Lottery Income and TDS in Income Tax Website
Your AIS or Form 26AS should contain lottery winnings income along with its TDS.
- Choose Appropriate Income Tax Return Form
Choose ITR-2 or ITR-3 to file income tax return forms for lottery winnings income.
- Report Lottery Winnings Income Under Other Sources
You should report lottery winnings in the Schedule SA under income from other sources.
- Report TDS from Lottery Winnings in AIS
Report lottery winnings income’s TDS in the Tax Payment Table.
- Compute Final Tax Liability Through ITR Software
Through use of ITR software compute final tax liability after paying refund claims.
- Pay Any Remaining Tax Liability Before Filing Tax Return
Verify your remaining tax liability after computation and pay it before completing return forms.
- Complete Return and Lodge Online in Time
Ensure completion of your income tax return forms and lodge them timely online.
Compliances for Income from Lottery Winnings (Section 115BB)
Some of the rules for complying with the law in case of declaration of lottery winnings income must be complied with otherwise you will face heavy fines or penalties.
Special Income from Lottery – Rules for Taxation
- Compulsory Declaration of Lottery Income Below ₹10,000
It is compulsory for you to report lottery winnings below ₹10,000 in spite of absence of TDS on it.
- Not Entitled to Claim Chapter VI-A Tax Reliefs
You cannot claim sections of Chapter VI-A for tax relief purposes as there is no basic allowance of ₹2.5 lakhs.
- Expenses Incur in Winning Lottery Not Allowed
No allowances/deductions can be claimed in case of expenses incurred in earning lottery income.
- Flat Rate of 30% Charged on Lottery Winnings
Tax on lottery winnings income is charged under 115BB at the flat rate of 30% from first rupee.
- Heavy Penalties for Not Declaring Lottery Winnings
Penalties in case of failure to report such special lottery income can be 50% to 200% of the tax due. Additionally, late payment penalty as per sections 234A, 234B and 234C can also be imposed.
Rules for Foreigners for Lottery Winnings Income
For foreigners, there is nothing special about the procedure for declaring taxes on lottery winnings as there are same rules as Indians have to follow.
Special Rule for Prize in Kind on Receipt of Lottery Winnings
Prize in kind requires you to provide payer with cash for receipt of the prize.
