Financial Year 1978-79
Circular No. 236 was issued by the Central Board of Direct Taxes on 15 April 1978. Its subject is Financial Year 1978-79.
Gives payers the rates and the working for deducting tax from lottery and crossword puzzle winnings in the financial year 1978-79 under section 194B, taking over from Circular No. 226 dated 14 July 1977. Deduction arises where the winnings exceed Rs. 1,000, whether the winner is resident or not. On the rates in Part II of the First Schedule to the Finance Bill, 1978, a resident non-company payee bears 34.5 per cent, being 30 per cent tax and 4.5 per cent surcharge; a non-resident non-company payee bears the same 34.5 per cent or the tax and surcharge worked on the slab rates as if the winnings were his total income, whichever is higher; a domestic company bears 23 per cent and a company other than a domestic company 73.5 per cent. The circular then works out the practical points: nothing is deducted where the winnings are Rs. 1,000 or less; where the prize is part cash and part kind the deduction is computed on the aggregate of the cash and the value of the prize in kind, but a prize wholly in kind bears no deduction; a prize paid after 31 March 1978 attracts the new rates even if the draw was held earlier; on instalments tax is deducted at each payment; deduction is from the prize paid to the owner of the lucky ticket and not from the bonus or commission of agents and ticket sellers; the tax is rounded to the nearest rupee under section 288B; Government deductions are paid over the same day and others within a week; and the recipient other than a company may apply in Form No. 13B for a certificate for lower or nil deduction, the payer issuing a certificate in Form No. 19B.
The annual instruction to lottery-conducting States, agents and other payers so that deduction from 1 April 1978 is at the year's rates.
FINANCIAL YEAR 1978-79
1751. Instructions for deduction of tax at source from winnings from lottery or crossword puzzle during financial year 1978-79 at the rates specified in Part II of First Schedule to Finance Bill, 1978
1. I am directed to invite a reference to this Department’s Circular No. 226 [F. No. 275/19/77-IT(B)], dated 14-7-1977 on the above subject. 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 specified in this behalf in the Finance Act of the relevant year. The rates of the deduction of income-tax at source for the financial year 1978-79 have been specified in Part II of the First Schedule to the Finance Bill, 1978 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 in India
34.5 per cent (IT 30 per cent + SC 4.5 per cent);
(b) where the person is not resident in India
34.5 per cent (IT 30 per cent + SC 4.5 per cent);
or
income-tax and surcharge on income-tax in respect of income at the rates prescribed in Sub-Paragraph I of Paragraph A of Part III of the First Schedule to the Finance Bill, 1978, 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 winnings from lotteries and crossword puzzles may be made during the financial year 1978-79, on payments made on or after April 1, 1978, according to the above rates. In case any changes in the rates proposed in the Finance Bill, 1978 are made by the Parliament, suitable instructions will be sent to you.
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 each prize 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 1978-79, from prizes given after March 31, 1978, 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 sale 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 is required to be paid to the credit of the Central Government on the same day. 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. The income-tax and surcharge should be shown separately in the challans and/or while sending "Account head" details to the Accountants General/Zonal Accounts Officers.
(8) The relevant forms in relation to the provisions for deduction of income-tax at source from winnings from lotteries and crossword puzzle prizes are prescribed by the Income-tax Rules. In this connection, the following instructions may please 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 persons 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.
Circular : No. 236 [F. No. 275/11/78-IT(B)], dated 15-4-1978.
In a demand on a lottery organiser for short deduction, or in a winner's claim for credit or refund on the strength of a Form No. 19B certificate.
A resident wins a prize of Rs. 20,000 in a State lottery paid in April 1978. Tax of 34.5 per cent, that is Rs. 6,900, is deducted and rounded to the nearest rupee under section 288B, and paid over within a week of deduction. The commission paid to the agent who sold the ticket bears no deduction under section 194B.
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.