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Taxability of awards

Vishal (Employee) (25 Points)

22 March 2016

The assessee has received an award from State Govt of Maharashtra for his work in the field of literature. Wether taxable or tax free

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Amit Kanunga (Article Assistant and Post Gradute) (644 Points)
Replied 22 March 2016

Awards may be divided in two sections i.e. some Awards are Tax-free in Exemption section 10(17A) and some Awards are taxable under section 56(2) under the head “Income from other sources”. For deciding taxability of the Awards one have to check from whom the Award was received and it was received for what purpose and whether it has been approved by the Central or State government or not.

the Awards given in the public interest by the Central or State Government or any other body after approval from the government are tax-free. Similarly Prizes given by Central or State government in cash or kind to the winners of Olympics or Asian games or Common wealth games are tax-free. It means that only Government approved Prizes are tax-free. E.g. the Olympic Award received by Mary Kom is tax-free. Also the National Award for Films received by Vidya Balan in the year 2011 was also tax fee. Likewise only notified awards are tax free. Award of your name i.e., “Arjun” wards to sportsmen by Central Government if notified then it also tax free

if a person receives prize from Unapproved authority or any Game show, Entertainment program, etc then it will be taxable. E.g. if a person receives Rs. 1 Crore from Kaun Banega Crorepati then it will be taxable. According to section 56(2) the said income is chargeable to tax under Income from Other Sources. Those Prizes which are not Government approved are liable to tax. The “Bharatratna” Award received by Sachin Tendulkar is tax free but “Wisden Cricketer” Award received by him is taxable. Government approval is required to make an Award tax free. Nowadays huge amount of Prizes are given to sport players in IPL, Kabaddi league, Football league etc. and they are taxable. Likewise Film artist receiving Film fare award is taxable.

on these Awards and prices flat 30% of income tax is required to be paid. If the amount of the Prize exceeds Rs. 10,000 then TDS is required to be deducted and the remaining amount is given to winner. It means even if one receives a price, tax has to be paid first; because of which the winner may become nervous.

it is difficult to run away from the Income Tax. Tax is required to be paid for Prizes received in Kind. E.g. if a person receives a car in a game Show then he has to pay 30% tax on the said amount. It is the responsibility of the Prize giver to make sure that the Prize receiver has paid the taxes.

it is a great honor to receive the Nobel Prize. It is a reward of the work done for needy and poor people. Some Awards are given for talent and brilliance. Further luck also plays a part in winning Awards. The Government levies tax on Prizes and Awards after taking its importance in public interest. A person doing good deeds in life, will get rewarded for it and for bad deeds will have to pay the prize for it!

Hope u get the point.

Vishal (Employee) (25 Points)
Replied 22 March 2016

Actually i need wether there is any specific list of awards that are exempt under income tax act, as the award received by the assessee is from State govt for his outstanding work in the field of Literature. So need some clear guidance. Thanks for your reply.