Financial Year 1985-86
Circular No. 428 was issued by the Central Board of Direct Taxes on 8 August 1985. Its subject is Financial Year 1985-86.
The annual instruction on deduction under section 194B from winnings from lottery or crossword puzzle for financial year 1985-86, following Circular No. 390 dated 8-8-1984 for the previous year. It gives the Part II First Schedule rates under the Finance Act, 1985: for a resident non-corporate person, 25 per cent on lottery winnings and 30 per cent on crossword puzzle winnings, with no surcharge; for a non-resident, 30 per cent or the rate that would apply if the winnings were his total income, whichever is higher; for a domestic company 22.575 per cent and for a non-domestic company 68.25 per cent, inclusive of surcharge. It then sets out the mechanics: no deduction where the winnings are Rs. 1,000 or less; where a prize is part cash and part kind, tax is deducted on the aggregate of cash and the value in kind, but no deduction where the prize is wholly in kind; deduction on each instalment when paid; deduction from the prize paid to the owner of the lucky ticket and not from bonus or commission paid to lottery agents or sellers; rounding to the nearest rupee under section 288B; payment to Government the same day for Government deductors and within one week of deduction otherwise; a lower or nil deduction certificate on Form No. 13B for a non-company recipient; the deduction certificate in Form No. 19B; and the quarterly statement in Form No. 26B.
The routine yearly instruction communicating the rates and procedure for deduction from lottery and crossword puzzle winnings.
FINANCIAL YEAR 1985-86
1743. Instructions for deduction of tax at source from winnings from lottery or crossword puzzle during financial year 1985-86 at the rates specified in Part II of First Schedule to Finance Act, 1985
1. I am directed to invite a reference to the Board’s Circular No. 390 [F. No. 275/15/84-IT(B)], dated 8-8-1984, wherein you were requested to issue necessary instructions for making deduction of income-tax at source from the "winnings from lottery or crossword puzzles" at the rates given in Part II of the First Schedule to the Finance Act, 1984.
2. You are aware that 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 any amount exceeding Rs. 1,000 is required to deduct income-tax thereon at the rates specified in this behalf in the Finance Act of the relevant year. The rates of deduction of income-tax, at source for the financial year 1985-86 specified in Part II of the First Schedule to the Finance Act, 1985, 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 :
(i) on income by way of winnings from lotteries
IT 25 per cent SC Nil;
(ii) on income by way of winnings from crossword puzzles
IT 30 per cent SC Nil;
(b) where the person is not resident in India
30 per cent of the amount of income;
or
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 Act, 1985 [Annex I], if the winnings from lottery or crossword puzzles had been the total income,
whichever is higher.
(ii) In the case of a company :
(a) where the company is a domestic company
22.575 per cent (IT 21.5 per cent + SC 1.075 per cent);
(b) where the company is not a domestic company
68.25 per cent (IT 65 per cent + SC 3.25 per cent).
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 a 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) Where the lottery or crossword puzzle is paid in instalments, the deduction will be made at the time of actual payment of each instalment.
(4) 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 the lottery agents or sellers of lottery tickets on sale made by them.
(5) 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.
(6) 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.
(7) 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, 1962. In this connection, the following instructions may please be noted :
(a) 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 thereon unless it is cancelled by the Income-tax Officer earlier.
(b) 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.
(c) 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. 428 [F. No. 275/30/85-IT(B)], dated 8-8-1985.
ANNEX. - EXTRACT FROM THE FINANCE ACT, 1985 - SUB-PARAGRAPH I OF PARAGRAPH A OF PART III OF THE FIRST SCHEDULE
Paragraph A
Sub-Paragraph I
In the case of every individual or Hindu undivided family or unregistered firm or other association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii ) of clause (31) of section 2 of the Income-tax Act, not being a case to which Sub-Paragraph II of this Paragraph or any other paragraph of this Part applies :
Rates of income-tax(1)
where the total income does not exceed Rs. 18,000
Nil;
(2)
where the total income exceeds Rs. 18,000 but does not exceed Rs. 25,000
25 per cent of the amount by which the total income exceeds Rs. 18,000;
(3)
where the total income exceeds Rs. 25,000 but does not exceed Rs. 50,000
Rs. 1,750 plus 30 per cent of the amount by which the total income exceeds Rs. 25,000;
(4)
where the total income exceeds Rs. 50,000 but does not exceed Rs. 1,00,000
Rs. 9,250 plus 40 per cent of the amount by which the total income exceeds Rs. 50,000;
(5)
where the total income exceeds Rs. 1,00,000
Rs. 29,250 plus 50 per cent of the amount by which the total income exceeds Rs. 1,00,000.
In old section 201 proceedings against a lottery distributor and in disputes over deduction on prizes given in kind.
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.