Deduction of income-tax at source-Section 194B of the Income-tax Act, 1961-Deduction from winnings from lottery or crossword puzzle-Financial year 1977-78 - Income Tax - 226/1977

Deduction of income-tax at source-Section 194B of the Income-tax Act, 1961-Deduction from winnings from lottery or crossword puzzle-Financial year 1977-78 Circular No. 226 Dated 14/7/1977 From Shri S.R. Wadhwa, Deputy Secretary, Department of Revenue, Government of India. To All State Governments. Sir, Subject: Deduction of income-tax at source-Section 194B of the Income-tax Act, 1961-Deduction from winnings from lottery or crossword puzzle-Financial year 1977-78. I am directed to invite a reference to this department's circular No.217* (F.No.275/19/77-IT-B) dated March 31, 1977, on the above subject. Under section 194B of the Income-tax Act, 1961, every person responsible for paying to any person, whether resident or non-resident, any income by way of winnings from any lottery or crossword puzzle in an amount exceeding Rs.1,000 is required to deduct income-tax thereon at rates specified in this behalf in the Finance Act of the relevant year. The rates of the deduction of income-tax at source for the financial year 1977-78 have been specified in Part II of the First Schedule to the Finance (No.2) Bill, 1977, and are as follows: Rates of income-tax including surcharge I. In the case of a person other than a company :— (a) where the person is resident in India 34.5 per cent (IT 30 per cent + SC 4.5 per cent); (b) where the person is not resident in India 34.5 per cent (IT 30 per cent + SC 4.5 per cent); or income-tax and surcharge on income-tax at the rates prescribed in Sub-Paragraph I of Paragraph A of Part III of the First Schedule to the Finance (No. 2) Bill, 1977, if the winnings from lottery or crossword puzzle had been the total income, whichever is higher. II. In the case of a company— (a) where the company is a domestic company 23 per cent (IT 22 per cent + SC 1 per cent); (b) where the company is not a domestic company 73.5 per cent (IT 70 per cent + SC 3.5 per cent). 2. It is requested that deduction of tax from winnings from lotteries and crossword puzzles may be made during the financial year 1977-78 on payment made after 17th June, 1977, according to the above rates. In case any changes in the rates proposed in the Finance (No.2) Bill, 1977, are made by Parliament, suitable instructions will be sent to you. 3. The substance of the main provisions in the law in so far as they relate deduction of income-tax at source from winnings from lotteries and crossword puzzles is given hereunder: (i) No tax will be deducted at source where the income by way of winnings from lottery or crossword puzzle is Rs.1,000 or less. (ii) where the prize is given partly in cash and partly in kind, income-tax will be deductible from the cash prize with reference to the aggregate amount of the cash prize and the value of the prize in kind. Where, however, the prize is given only in kind no income-tax will be required to be deducted. (iii) Income-tax will be deductible at the aforesaid rates during the financial year 1977-78 from prizes given after 31st March, 1977, even if the relevant draw in respect of lottery or, as the case may be, the competition in respect of a crossword puzzle may have been held on or before that date. (iv) Where the lottery or crossword puzzle is paid in instalments, the deduction will be made at the time of actual payment of each instalment. (v) Income-tax will be deductible from the amount of the prize money paid to the owner of the lucky ticket with reference to the amount paid to him. Income-tax is not deductible from the income by way of bonus or commission paid to lottery amounts or sellers of lottery tickets on the sales made by them. (vi) In view of section 288B of the Income-tax Act, 1961, the amount of tax to be deducted at source should be rounded off to the nearest rupee by ignoring amounts less than fifty paise and increasing amounts of fifty paise or more to one rupee. (vii) Tax deducted on behalf of Government should be paid to the credit of the Central Government on the same day by book adjustment. In other cases, the tax deducted should be paid to the credit of the Central Government within one week from the date of deduction. The challans for paying income-tax in the Government account may be obtained from the Income-tax Officer concerned. (viii) The relevant forms in relation to the provisions for deduction of income-tax at source from winnings from lotteries and crossword puzzles prizes are prescribed by the Income-tax Rules, 1962. In this connection, the following instructions may be noted: (a) In the case of any person, other than a company, it is open to the recipient of the prize to make an application in Form No. 13B to the Income-tax Officer concerned and obtain from him a certificate authorising the payer to deduct tax at such lower rates or deduct no tax as may be appropriate to his case. Such certificate will be valid for the period specified therein unless it is cancelled by the Income-tax Officer earlier. (b) The person responsible for making any payment by way of winnings from lotteries or crossword puzzles should issue a certificate in Form No. 19B showing therein the amount of the prize, the amount of tax deducted at source and the date of payment in the Government account. (c) The person making deduction of tax in accordance with section 194B from income by way of winnings from lotteries or crossword puzzles should send to the Income-tax Officer having jurisdiction to assess him the statement in Form No. 26B quarterly on July 15th, October 15th, January 15th and April 15th in respect of deductions made by him during the immediately preceding quarter. 4. These instructions may be brought to the notice of all concerned under the control of the State Government. 5. In cases of doubt the Income-tax Officer concerned may be consulted. Yours faithfully, (Sd.) S.R. Wadhwa, Deputy Secretary, Department of Revenue, Government of India. * See page 75 supra.