Nowadays there are several game shows – from the pioneering show Kaun Banega Crorepati (KBC) to Fear Factor – and reality shows such as Indian Idol, Roadies, Sa Re Ga Ma Pa and Dance India Dance. All these shows come with a large prize money – running into crores – or prizes such as a house or car. If you’ve every envied your neighbour for winning anything in shows and lucky draws, remember that the entire amount does not come into the winner’s hands. Any money or prize you win from a game show, reality show or lottery, is subject to tax deduction at source (TDS).
The Income Tax Act, 1961 specifies in Section 56(2)(ib) the ‘Income From Other Sources’ that are taxable. The Finance Act 2001 amended the description of games in relation to taxation – after KBC was launched in 2000 – to include television and electronic (online) game formats. Under Section 194B, winnings from the following sources are subject to TDS of 30%:
- Lotteries and lucky draws
- Card games, gambling or betting
- Crossword puzzles
- TV or electronic competitive game shows
There is also a 2% education cess and 1% Secondary and Higher Secondary Education Cess on this 30% tax. This brings the total tax on game show winnings to 30.9%. An additional 10% surcharge is also applicable on the winning amount if the amount is more than Rs. 10 lakh. This TDS has to be deducted by the person or organisation responsible for paying the prize money to the winner.
Points Of Note On Taxation Of Game Show Winnings:
The following points are worth remembering in relation to TDS on prize money:
- Everyone – irrespective of their regular income, the amount of winnings, age or physical condition – has to pay a tax of 30.9%.
- The TDS of 30.9% is a flat tax on the winning amount; it will not be added to your income and you will not be able to benefit from your income tax rate slab.
- The prize money will be considered as separate from your income, and your regular income will be taxable as per your income tax rate slab.
- You do not get any deduction or exemption on tax in the case of game show prizes – even if you invest the prize money in any of the savings instruments mentioned under Sections 80C to 80U.
- If your winnings are in the form of a car or jewellery or apartment or any moveable or immovable asset, then you have to pay the TDS of 30.9% to the government before claiming the prize. For example, if you have won a car worth Rs. 8 lakh in a game show, you have to pay to the taxman Rs. 2,47,200 before you can drive the vehicle home. If you cannot afford to pay the amount, you may have to forsake the prize!
- The only exception to taxation on game show winnings is that you do not have to pay tax on the amount that you donate – partially or wholly – either to the government or back to the agency conducting the lottery/game show.
FAQs On Tax On Winnings Of Game Shows And Lottery:
- If I have won just Rs. 5,000 in a tambola online, do I have to pay tax on the amount?
Yes. There is no minimum amount excepted from tax for winnings from the categories listed under Section 56(2)(ib).
- I won Rs. 12 lakh from KBC this year. Can I get tax deduction if I invest the amount in FDs or ELSS?
No. Under Section 58(4), no tax exemption or deduction can be availed by the person winning cash or assets as prize from a game show, lottery, etc. So you cannot claim any deduction based on your usual income tax deduction options.
- If I win a flat as prize in a reality show, will that be considered as a gift?
Winning a flat can prove to be a costly affair. Apart from paying TDS of 30.9% (plus 10% surcharge if the cost of the flat is more than Rs. 10 lakh), the flat will become an owned asset for you. If this flat is not your first home, then the provisions of wealth tax will apply here. The same principle applies for prizes such as car, jewellery and other kind of assets.