Tax on KBC & Online Games, Lottery and Shows

Now a days every TV channel is conducting some contests which offer considerable amount of prize money to the winners…For example KBC, Indian Idol ,Big boss etc.,

To many people it is not known that the amount of prize money won through these shows is taxable at a flat rate.

KBC :

KBC is a show where winning is wholly not dependent on chance but knowledge and skills of the contestant also plays a part in the winning.

As per the amendment brought by Finance Act 2001 ,the definition of income include card game and other game of any sort in its definition. An explanation was added to section 2(24)(ix) to define the term lottery and games as under:

Lottery :

lottery includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner what so ever, under any scheme or arrangements by whatever name it is called.

Card game and other game of any kind :

It includes any game show, an entertainment show on television or electronic media , in which people compete to win prizes or any other similar rewards.

Taxability of income :

Section 115BB of the Income-tax Act, under the chapter ‘Determination of Tax in certain Special Cases,’ prescribes income-tax at the flat rate of 30% on all incomes by way of winnings from lottery or crossword puzzle or race including horse race or card game and other game of any sort or from gambling or betting of any form or nature whatsoever. In fact,considering the levy of 3% education cess on theamount of income-tax, the effective tax rate would work out to 30.9%.

Basic exemption limit ?

Even in a situation where an assessee has no source of income at all and his prize money from a lottery or a game show is only Rs 1,00,000, tax ofRs 30,900 would still be levied on the same, since no basic tax exemption or any allowance or deduction are eligible for set-off against such winnings.

TDS on Prize won :

1.If prize won is in kind :

As per section 194B of Income Tax Act, 1961, if the prize money is not in cash but in kind or partly in cash or party in kind then the receiver of the prize is required to deposit the tax calculated @ 30% of the aggregate value of the prize.

2.If prize won is in cash :

section 194B of Income Tax Act, 1961, says that if the prize money is more than Rs10000 then TDS shall be deducted. TDS rate prescribed is 30%. Thus if you win Rs. 1 crore in a game show, you will receive net Rs. 70 lakhs after deducted of tax Rs.30 lakhs.