Circular No. 264

What it does

Holds that prizes awarded to lottery agents under 'lucky dip draws' are lotteries within section 194B, so tax must be deducted from them. Under such schemes agents are grouped by the number of tickets they have bought and prizes are awarded category-wise by a draw of lucky tickets; the Board's reasoning is that the prize depends wholly on the chance draw. State Governments and Union territories running lotteries are asked to deduct at the rates prescribed by the annual Finance Act for lotteries or crossword puzzles from lucky dip prizes won by agents, and to bring this to the notice of all concerned.

Why it was issued

The Ministry had occasion to consider whether deduction under section 194B applied to prizes awarded to lottery agents in what are popularly called lucky dip draws.

Who it reaches

State Governments and Union territories running lotteries
Lottery agents and distributors winning lucky dip prizes
Officers of State lottery directorates deducting at source

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.194B	s.393, s.402

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

SECTION 194B l WINNINGS FROM LOTTERY OR CROSSWORD PUZZLE

1075. Prizes awarded to agents under "lucky dip draws" scheme - Whether they are "lotteries" within the meaning of the section from which tax is required to be deducted at source
1. This Ministry has had an occasion to consider the question of the deduction of tax at source under section 194B from prizes awarded to lottery agents in what are popularly known as "lucky dip draws".
2. Under the scheme of "lucky dip draws", the agents are generally grouped into various categories according to the number of tickets purchased by them. The prizes are awarded category-wise, through draws of the lucky tickets. These prizes are "lotteries" within the meaning of section 194B as they are dependent wholly on the chance draw of a lucky ticket.
3. The State Governments and Union territories running lotteries are, therefore, requested to deduct tax at source at the rates prescribed by the Annual Finance Act in respect of "lotteries or crossword puzzles" from "lucky dip" prizes won by lottery agents.
4. This clarification may please be brought to the notice of all concerned under the control of the State Governments and Union territories.
Circular: No. 264 [F. No. 275/58/79-IT(B)], dated 11-2-1980.

What to watch

The characterisation as a lottery turns on the prize depending wholly on chance; a reward measured by sales performance would not answer that description.
The rate is whatever the annual Finance Act prescribes for lotteries and crossword puzzles for the year in question.
The section 194B threshold and rates have changed many times since 1980.

Where you meet it

On a section 201 demand against a State lottery directorate for not deducting from agents' draw prizes.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 661 — Section 194B l Winnings from Lottery or Crossword Puzzle 16 September 1993
Circular No. 631 — Financial Year 1992-93 20 August 1992
Circular No. 616 — Financial Year 1991-92 22 November 1991
Circular No. 569 — Financial Year 1990-91 27 July 1990
Circular No. 536 — Financial Year 1990-91 6 July 1989
Circular No. 515 — Financial Year 1988-89 31 May 1988

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A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.

What this is