The sole purpose of frequent LottoLand, TheLotter, or KBC lottery number check is to try your luck. Surprisingly, most people understand the lottery concept as merely buying lotto tickets, participating in various draws, and winning or losing. Only a few know about the concerned lottery laws, especially the lottery tax, surcharge, and cess-related laws. That is, very few players understand the lottery tax and related requirements. On that note, in this article, we will explore various aspects of lottery laws in India to help you comprehend different lottery-tax-related rules.
Let’s get started.
The General Lottery Tax and Rates:
Like most states worldwide, lotteries in India are subject to two different tax levies – the Goods and Services Tax (GST) and the Income Tax (IT).
The Goods and Services Tax on Lottery Tickets:
Essentially, the GST tax is levied on lottery tickets. While the lottery tickets are actionable claims, they are categorized as goods per the Indian GST Act. As such, the sale of lottery tickets is considered a supply of taxable goods and services, and therefore, they attract the GST taxes.
Typically, the GST tax rates on lottery tickets vary depending on the lottery ticket supplier (operator). Principally, are two forms of lotteryprograms:
- Run by State Government – They are government-owned lottery programs – run by government agencies.Usually, the lotteries are conducted within specific states and are taxed at a rate of 12%. Here, the lottery tickets distributors pay the GST tax,usually under reverse charge at the tickets obtaining time.
- Authorized by State Government – These are private lotteries – owned and operated by private institutions. Here, tickets suppliers pay the GST taxesat a rate of 28%.
The Income Tax :
According to Income Tax ActSection 56(2)(ib),any winnings from lotteries are considered to be income under the “Income from Other Sources,” and thus, they are subjective to income tax. Principally, 30% of all ₹ 10,000 and above winnings goes to income taxes.
Notably, no deductions are allowed. Also, the income (winnings) is not entitled to tax slabs benefits. Therefore, income tax is levied at a fixed rate.
Typically, the levies are TDS taxes; hence the lottery operators are responsible for deducting the appropriate amounts before the presentationof the winnings.
Also, note that the taxes applyto all forms of rewards, including cash, kind, and partly kind and partly cash rewards. Thus, if the winning is in the form of kind, the value of the prize is calculated, and the winner paysappropriate tax amounts. Here, the winner should pay the tax amounts before receiving his reward.
Also, note that if the prizes shall be paid in installments, the tax is levied on every portion paid.
If the winnings exceed Rs. 1 crore, you will be required to pay additional charges – a particular percentage of the total income tax you are already supposed to pay. Usually, the surcharge is 15% of the tax amount – 15% of 30% of the taxable income. Therefore, if the winnings exceed ₹ 10,000,000, you will pay income tax at a rate of 34.5% (4.5% plus 30%). Hence, the tax will be ₹ 3450000.
Cess: Education Cess (EC) & Secondary & Higher Education Cess (SHEC):
Besides income tax, lottery winnings are subject to cess deduction. As such, you are to pay a 3% cess on top of the total income tax amounts. Usually,cess is a percentage of the income tax(surcharge included). Therefore, cess is 3% of 34.5% of the total taxable income, topping the income tax to 35.5%. In other words, if you win ₹ 10,000,000, 35.5% of this amount goes to tax. Therefore, ₹ 3,550,000 goes to tax.
In simple terms, the total payable tax is equal to income tax (30%) + surcharge (4.5%) + cess (1%).
Total tax = 30% + 4.5% + 1%
It is evident that a significant amount of your winning goes to tax. However, this should not scare you away from trying your luck. after all, the amount you get after taxes are deducted can change your life significantly. Therefore, if you feel lucky, go ahead and work your way to the coming KBC WhatsApp lottery winner 2022 list.