Section 194G | TDS on Commission on Sale of Lottery Tickets

CA.R.S.KALRA | Last updated: 21 January 2021

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Quick Summary

Section 194G of the Income Tax Act outlines the rules for Tax Deducted at Source (TDS) on commission earned from lottery tickets. If you pay over £15,000 in commission, remuneration, or prizes to anyone involved in stocking, distributing, or selling lottery tickets, you must deduct TDS. The standard rate for this deduction is 5%, though a temporary reduced rate applied between May 2020 and March 2021. It's crucial to deduct this tax at the earliest of when the income is credited or paid.

194G. (1) Any person who is responsible for paying, on or after the 1st day of October, 1991 to any person, who is or has been stocking, distributing, purchasing or selling lottery tickets, any income by way of commission, remuneration or prize (by whatever name called) on such tickets in an amount exceeding fifteen thousand rupees shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of five percent.

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Explanation.- For the purposes of this section, where any income is credited to any account, whether called "Suspense Account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.

TDS on Lottery Ticket Commission: Section 194G Explained

1) Who is responsible to deduct tax u/s 194G?

Any person responsible for paying any income by way of commission, remuneration or prize (by whatever name called) on stocking, distributing, purchasing or selling lottery tickets, shall be responsible to deduct tax at source.

2) When to Deduct TDS under Section 194G?

Tax shall be deducted under this section, either at the time of credit to the account of the payee or at the time of payment thereof, whichever is earlier.

For this purpose, credit to "Suspense account" or any other name shall be deemed to be a credit of such income to the account of the payee.

For this purpose, "payment" can be in cash or by issue of a cheque or draft or by any other mode.

3) Rate of TDS under Section 194G

The rate of tax deduction u/s 194G is 5% (3.75% w.e.f. 14.05.2020 to 31.03.2021)

No surcharge and Health & Education Cess shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.
The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.

4) Threshold limit

Tax is required to be deducted under this section only if payment is exceeding Rs. 15,000.

5) Where TDS under Section 194G is either Not to be Deducted or to be Deducted at Lower Rate [Section 197]

The assessee case make an application in Form No. 13 to the Assessing Officer and obtain from him such certificate as may be appropriate authorising the payer to deduct tax at nil rate or at lower rate.

As per section 206AA(4), no certificate under section 197 for deduction of tax at Nil rate or lower rate shall be granted unless the application made under that section contains the Permanent Account Number (PAN) of the applicant.

FAQ :

Any person responsible for paying commission, remuneration, or prizes on lottery tickets to individuals involved in stocking, distributing, purchasing, or selling them is responsible for deducting TDS.

TDS is required under Section 194G only if the total payment for commission, remuneration, or prizes exceeds fifteen thousand rupees in a financial year.

The standard rate of TDS deduction under Section 194G is 5%. However, a reduced rate of 3.75% was applicable from 14.05.2020 to 31.03.2021. If the deductee does not provide their PAN, the TDS rate will be 20%.

Tax must be deducted at the time of crediting the income to the payee's account or at the time of payment, whichever occurs earlier. Crediting to a 'Suspense Account' or any other account is considered credit to the payee's account.

Yes, an assessee can apply in Form No. 13 to the Assessing Officer to obtain a certificate authorising deduction of tax at a nil or lower rate. This application requires the applicant's PAN.