You must be aware that lottery games in India are only conducted and monitored by the State Governments. They do so by complying with the terms and conditions that are stipulated by the Central Government. State governments allow agents to open their outlets, which are registered from where people can buy lottery tickets. The same can also online international lotteries be bought online. Additionally, you can participate in international online lotteries at Lottoland and bring home the jackpot. You have to pay taxes when you win.
If you win a lottery, let’s see how to proceed with the tax returns.
Procedure for Filing a Tax Return
If you are an Indian citizen, you will have to file your income tax returns according to the Indian law. According to the Income Tax Act, 1961, there are five income sources mentioned, which are salary, profession or business, house property, capital gains, and other sources. The income from lottery, betting and gifts fall under the last head, which is “Income from other sources.”
The tax rate on this head where incomes of gambling nature as lottery falls attracts a 30 percent tax rate. If you win any lottery or competition that amounts to more than five thousand rupees, you are liable to pay tax on it. Normally, the tax is deducted at source on the winnings as per the provision in Section 194B of the Income Tax Act, 1961. In case it is not, which mostly happens in the lottery winnings, the person needs to pay it and show it in his or her tax returns.
As per the provisions of Section 115BB of Income Tax Act 1961, the winning from the lottery is taxable in India as follows.
It attracts a flat rate of 30% with no deduction allowed. Also, it doesn’t matter in which the tax slab of an individual falls, and hence no benefit of tax slab can be taken.
If the total income is more than INR 1 Crore, then a person is liable to pay a surcharge of 15% on the tax amount.
Education Cess (EC) and Secondary and Higher Education Cess (SHEC)
This is an additional amount that one needs to pay. EC is paid at the rate of 2% on tax amount, and SHEC is 1% on Surcharge.
Let’s say a person wins a 10 crore lottery. Then given by the above taxation clauses, his tax on INR 10 Crore at 30% will be INR 3 Crore. Now on 3 Crore, he will have to shell out a surcharge of INR 0.45 Crore at 15%. EC and SHEC will amount to another 0.1035 Crore. This all amounts to INR 3.5535 Crores for a win of 10 crores.
The point of note is that even after paying off all the taxes the person is left with nearly 6.5 crores, which he can use to live the left of his life in utmost comfort.
From a lottery winning, no expenses can be adjusted in the IT returns. You cannot set off this income against any carried forward loss and no Chapter VI-A deduction is allowed. So basically, you have to pay a flat rate of 30% on the earnings from the lottery.