Financial Year 1976-77
Circular No. 198 was issued by the Central Board of Direct Taxes on 25 June 1976. Its subject is Financial Year 1976-77.
Sets out the section 194B deduction rates and working rules for the financial year 1976-77 under Part II of the First Schedule to the Finance Act, 1976. For a person other than a company, resident or non-resident, the rate is 33 per cent, made up of income-tax at 30 per cent and surcharge at 3 per cent, with a non-resident paying the higher of that and the slab rates in Sub-Paragraph I of Paragraph A of Part III if the winnings had been his total income; a domestic company suffers 23 per cent and a company that is not domestic 73.5 per cent. Section 194B itself bites only where the winnings exceed Rs. 1,000. The rules that follow: no deduction where winnings are Rs. 1,000 or less; where the prize is partly cash and partly in kind, tax comes out of the cash prize computed on the aggregate of cash and the value of the kind, and a prize wholly in kind bears no deduction; the rates apply to prizes given after 31 March 1976 even if the draw was held earlier; deduction is made at each instalment where the prize is paid in instalments; tax is deducted from the prize money paid to the owner of the lucky ticket, not from bonus or commission paid to lottery agents or ticket sellers; the sum is rounded to the nearest rupee under section 288B; and tax deducted on behalf of Government goes to the Central Government the same day by book adjustment while others have one week. On forms, a non-corporate prize winner may apply in Form No. 13B for a certificate for a lower rate or nil deduction, the payer must issue a certificate in Form No. 19B showing the prize, the tax deducted and the date of payment into the Government account, and the deductor must file a quarterly statement in Form No. 26B by 15 July, 15 October, 15 January and 15 April.
The annual Board instruction communicating the rates prescribed by that year's Finance Act for deduction from lottery and crossword puzzle winnings.
FINANCIAL YEAR 1976-77
1753. Instructions for deduction of tax at source from winnings from lottery or crossword puzzle during financial year 1976-77 at the rates specified in Part II of First Schedule to Finance Act, 1976
1. Under section 194B every person responsible for paying to any person, whether resident or non-resident, any income by way of winnings from any lottery or crossword puzzle, in an amount exceeding Rs. 1,000 is required to deduct income-tax thereon at rates prescribed in this behalf in the Finance Act of the relevant year. The rates of deduction of income-tax at source for the financial year 1975-76 have been prescribed in Part II of the First Schedule to the Finance Act, 1976 and are as follows :Rates of income-tax including surcharge
I. In the case of a person other than a company—
(a) where the person is resident
33 per cent (IT 30 per cent + SC 3 per cent);
(b) where the person is not resident in India
33 per cent (IT 30 per cent + SC 3 per cent);
or
income-tax and surcharge on income-tax at the rates prescribed in Sub-Paragraph I of Paragraph A of Part III of the First Schedule to the Finance Bill, 1976, if the winnings from lottery or crossword puzzle had been the total income,
whichever is higher.
II. In the case of a company—
(a) where the company is a domestic company
23 per cent (IT 22 per cent + SC 1 per cent);
(b) where the company is not a domestic company
73.5 per cent (IT 70 per cent + SC 3.5 per cent).
2. It is requested that deduction of tax from lotteries and crossword puzzle prizes may be made during the financial year 1976-77, according to the above rates.
3. The substance of the main provisions in the law insofar as they relate to deduction of income-tax at source from winnings from lotteries and crossword puzzles is given hereunder :
(1) No tax will be deducted at source where the income by way of winnings from lottery or crossword puzzle is Rs. 1,000 or less.
(2) Where the prize is given partly in cash and partly in kind, income-tax will be deductible from the cash prizes with reference to the aggregate amount of the cash prize and the value of the prize in kind. Where, however, the prize is given only in kind no income-tax will be required to be deducted.
(3) Income-tax will be deductible at the aforesaid rates during the financial year 1976-77, from prizes given after March 31, 1976, even if the relevant draw in respect of lottery or, as the case may be, the competition in respect of a crossword puzzle may have been held on or before that date.
(4) Where the lottery or crossword puzzle is paid in instalments, the deduction will be made at the time of actual payment of each instalment.
(5) Income-tax will be deductible from the amount of the prize money paid to the owner of the lucky ticket with reference to the amount paid to him. Income-tax is not deductible from the income by way of bonus or commission paid to lottery agents or sellers of lottery tickets on the sales made by them.
(6) In view of section 288B, the amount of tax to be deducted at source should be rounded off to the nearest rupee by ignoring amounts less than fifty paise and increasing amounts of fifty paise or more to one rupee.
(7) Tax deducted on behalf of Government should be paid to the credit of the Central Government on the same day by book adjustment. In other cases, the tax deducted should be paid to the credit of the Central Government within one week from the date of deduction. The challans for paying income-tax in the Government account may be obtained from the Income-tax Officer concerned.
(8) The relevant forms in relation to the provisions for deduction of income-tax at source from lotteries and crossword puzzle prizes are prescribed by the Income-tax Rules. In this connection, the following instructions may be noted :
(i) In the case of any person, other than a company, it is open to the recipient of the prize to make an application in Form No. 13B to the Income-tax Officer concerned and obtain from him a certificate authorising the payer to deduct tax at such lower rates or deduct no tax as may be appropriate to his case. Such a certificate will be valid for the period specified therein unless it is cancelled by the Income-tax Officer earlier.
(ii) The person responsible for making any payment by way of winnings from lotteries or crossword puzzles should issue a certificate in Form No. 19B showing therein the amount of the prize, the amount of tax deducted at source and the date of payment in the Government account.
(iii) The person making deduction of tax in accordance with section 194B from income by way of winnings from lotteries or crossword puzzles should send to the Income-tax Officer having jurisdiction to assess him the statement in Form No. 26B quarterly on July 15, October 15, January 15 and April 15 in respect of deductions made by him during the immediately preceding quarter.
4. These instructions may be brought to the notice of all concerned under the control of the State Government.
5. In case of doubt the Income-tax Officer concerned may be consulted.
Circular : No. 198 [F. No. 275/61/76-ITJ], dated 25-6-1976.
A dispute over deduction on a 1976-77 lottery prize, or a default proceeding for a missed Form No. 26B statement.
A resident wins a prize made up of Rs. 20,000 in cash and a scooter valued at Rs. 6,000. Tax is computed on Rs. 26,000 at 33 per cent, Rs. 8,580, and is taken out of the cash portion, leaving the winner Rs. 11,420 in cash along with the scooter.
Forms it names. Form No. 13B, Form No. 19B, Form No. 26B
Source: the Income Tax Department’s own published text — its page for this instrument.