Circular No. 467

Instructions for deduction of tax at source from winnings from lottery or crossword puzzle or horse race during financial year 1986-87 at the rates specified in Part II of First Schedule to Finance Act, 1986

What this is

Circular No. 467 was issued by the Central Board of Direct Taxes on 21 August 1986. Its subject is Instructions for deduction of tax at source from winnings from lottery or crossword puzzle or horse race during financial year 1986-87 at the rates specified in Part II of First Schedule to Finance Act, 1986.

What it does

Sets the rates for deduction under sections 194B and 194BB for the financial year 1986-87 from winnings from lottery, crossword puzzles and horse races: 40 per cent for a resident non-company, and for a non-resident 30 per cent or slab rates whichever is higher, 21.5 per cent for a domestic company and 65 per cent for a non-domestic company. It records that the Finance Act, 1986 raised the threshold under both sections to Rs. 5,000 with effect from 1-6-1986, from Rs. 1,000 under section 194B and Rs. 2,500 under section 194BB. It also notes the new section 115BB, which charges gross winnings from lotteries, crossword puzzles, races including horse races other than the activity of owning and maintaining race horses, card games, other games of any sort, gambling and betting at a flat 40 per cent.

Why it was issued

It is the annual instruction to deductors, following Circular No. 428 dated 8-8-1985 and Circular No. 425 dated 24-7-1985 which had given the rates for 1985-86, and it carries the Finance Act, 1986 changes.

Who it reaches

Lottery and crossword puzzle organisers paying winnings
Book-makers and licensed race course operators under section 194BB
Winners, resident and non-resident
Domestic and foreign company winners

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.115BB	s.194
s.194B	s.393, s.402
s.194BB	s.393

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.

Instructions for deduction of tax at source from winnings from lottery or crossword puzzle or horse race during financial year 1986-87 at the rates specified in Part II of First Schedule to Finance Act, 1986

1. I am directed to invite a reference to this Department’s Circular No. 428 [F. No. 275/30/85-IT(B)], dated 8-8-1985 and Circular No. 425 [F. No. 275/31/85-IT(B)], dated 24-7-1985 on the above subject, wherein the rates at which deductions of tax under sections 194B and 194BB to be made during the financial year 1985-86 from winnings from lottery or crossword puzzles or horse races were communicated.
2. According to the provisions of section 194B, every person responsible for paying to any person, whether resident or non-resident, any income by way of winnings from lottery or crossword puzzles 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. According to the provisions of section 194BB, any person, being a book-maker or a person to whom licence has been granted by the Government under any law for the time being in force for horse racing in any race course, or for arranging for wagering or betting in any race course, who is responsible for paying to any person any income by way of winnings from horse races in any amount exceeding Rs. 2,500, is required to deduct income-tax thereon at the rates specified in this behalf in the Finance Act of the relevant year. The Finance Act, 1986 has raised limits specified under sections 194B and 194BB to Rs. 5,000 under the aforesaid sections with effect from 1-6-1986.
The rates of deduction of tax at source under sections 194B and 194BB during the financial year 1986-87 as specified in Part II of the First Schedule to the Finance Act, 1986 are as under :
Rates of income-tax

(i) In the case of a person other than a company :

(a) where the person is resident in India

40 per cent;

(b) where the person is not resident in the amount of the income;

income-tax at 30 per cent of India

or

income-tax in respect of income at the rates specified in Sub-Paragraph I of Paragraph A of Part III of the First Schedule to the Finance Act, 1986 [Annex I], if such income had been the total income,

whichever is higher.

(ii) In the case of a company :

(a) where the company is a domestic company

21.5 per cent;

(b) where the company is not a domestic company

65 per cent.

3. The Finance Act, 1986 has inserted a new section 115BB in the Income-tax Act to provide the gross winnings from lotteries, crossword puzzles, races including horse races (other than income from the activity of owning and maintaining race horses), card games and other games of any sort or from gambling or betting of any nature whatsoever shall be chargeable to income-tax at a flat rate of 40 per cent on the gross winnings.
4. The substance of the main provisions in the law in so far as they relate to deduction of income-tax at source from winnings from lotteries or crossword puzzles or horse races is available in the aforesaid circulars. These instructions are not exhaustive and are issued only with a view to helping the persons responsible for making deduction of tax at source under these sections. Wherever there is difference of opinion, a reference should always be made to the provisions of the Act, and the relevant Finance Act through which the changes in law are made. In case any assistance is required, the Income-tax Officer concerned or the local Public Relation Officers of the Income-tax Department may be approached for the same, who will, if necessary, obtain orders of the higher authorities in the matter.
Circular : No. 467 [F.No. 275/69/86-IT(B)], dated 21-8-1986.

What to watch

The higher Rs. 5,000 threshold runs only from 1-6-1986, so payments earlier in that year go by the old limits.
Section 115BB taxes gross winnings, with no deduction, and expressly leaves out income from owning and maintaining race horses.
The circular itself says the instructions are not exhaustive and that the Act and the relevant Finance Act must be referred to where there is a difference of opinion.
The rates speak only for financial year 1986-87 and the section 194B and 194BB thresholds have been raised many times since.

Where you meet it

On a section 201 demand against a lottery agent or race club for short deduction from a prize payout.

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. 515 — Financial Year 1988-89 31 May 1988
Circular No. 485 — Financial Year 1987-88 27 May 1987
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

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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.