LRS RBI - Lottery winnings in India or abroad - Income Tax

Hello,

I believe lottery winnings cannot be transferred abroad under the Liberalised Remittance Scheme (LRS) of the government of India.

Is there any law/rule based on which lottery winnings can be transferred abroad in the following cases?

1. Ram won INR 1 crore in a lottery in India and wants to transfer the money (after tax) abroad to purchase a property.

2. Ram won $1 million in a US lottery (lottery purchased online through Lotto/lotteryworld, etc.) and received the amount (after US tax) directly in his Indian bank account. Ram wants to transfer the money abroad to purchase a property.

3. Ram puts the lottery winnings (from India or abroad) in a fixed deposit in India and wants to transfer the interest amount abroad under the LRS.

Thanks for your valuable time.

Best regards

Hi G Raja,

Great questions! Let me break down the Liberalised Remittance Scheme (LRS) rules relating to lottery winnings and their transfer abroad under different scenarios:

1. Lottery Winnings Won in India (INR 1 crore) and Transfer Abroad

LRS Purpose: Under LRS, resident individuals can remit up to USD 250,000 per financial year abroad for permitted current or capital account transactions.
Prohibition: As per RBI guidelines, remittance of money out of India through LRS cannot be made from income sources which are illegal or prohibited in India.
Lottery Winnings:
- Lottery winnings are considered income and taxable in India (at flat 30% under Section 115BB).
- There is no explicit prohibition on transferring lottery winnings abroad after tax compliance.
- However, funds need to be routed through proper banking channels with valid documentation (e.g., tax paid proof).
Conclusion: Ram can transfer his lottery winnings abroad under LRS after fulfilling all tax liabilities and documentation.

2. Lottery Winnings Won Abroad (US Lottery) and Received in Indian Bank

The US lottery winnings are foreign income remitted to India.
Once funds are in Indian bank account and taxed as per Indian income tax laws (if applicable), the amount in INR is eligible for outward remittance under LRS, subject to limit of USD 250,000 per year.
Important: RBI treats foreign lottery winnings as foreign income, which should be disclosed in ITR.
Conclusion: Ram can remit the funds abroad under LRS, provided he complies with tax and FEMA documentation.

3. Interest Earned on Lottery Winnings Fixed Deposit in India and Remittance Abroad

Interest income earned on deposits in India is taxable in India.
Outward remittance of interest income is allowed under LRS, subject to the annual limit and documentation.
Conclusion: Ram can remit interest earned on FD abroad under LRS.

Important Notes:

All remittances under LRS require proper documentation, including PAN, tax return filing, and declaration forms.
Remittances for purchase of immovable property abroad are allowed under LRS, so using lottery winnings to buy property abroad is permissible.
Always consult with a tax or FEMA expert for compliance and documentation before remittance.

Summary Table

Scenario	Transfer Allowed Under LRS?	Conditions
Lottery winnings from India (after tax)	Yes	Tax paid, documentation in place
Foreign lottery winnings remitted to India	Yes	Tax compliance, document proof
Interest on FD in India	Yes	Subject to limits and docs