Section 194G

Section 194G of Income Tax Act


We’re sure you’ve considered purchasing a lottery ticket and hoping to win at some point in your life. Lottery tickets are an appealing way for many people in India to try their luck.

However, you may be surprised to learn that the ticket seller (or agent) who sells lottery tickets is required to follow the tax deduction provisions. People consider a lottery ticket to be nothing more than a fortune bag that brings in money. However, not everyone is aware of the tax implications associated with the fortune bag. Section 194G specifies the details of TDS on the purchase, distribution, and other activities related to lottery tickets. Let’s go over section 194G in depth:

Who Must Deduct TDS Under Section 194G? Persons who pay a commission, remuneration, or prize on lottery tickets to someone who stocks, distributes, purchases, or sells lottery tickets.

When Should TDS Be Deducted Under Section 194G?

Tax shall be deducted under this section at the time of credit to the payee’s account or at the time of payment, whichever is earlier.

Credit to “Suspense account” or any other name shall be deemed to be a credit of such income to the payee’s account for this purpose.

For this purpose, “payment” can be made in cash, by cheque or draught, or in any other way.

TDS rate under Section 194G

The tax deduction rate under Section 194G is 5%.

There will be no surcharge or Health and Education Cess added to the above rates. As a result, tax will be deducted at the basic rate at the point of sale. If the deductee does not provide PAN, the TDS rate will be 20% in all cases.

Where TDS is either not to be deducted or is to be deducted at a lower rate Section 197 ? The assessee must submit an application to the Assessing Officer in Form No. 13 and obtain from him the appropriate certificate authorising the payer to deduct tax at the nil rate or at a lower rate. According to section 206AA(4), no certificate under section 197 for tax deduction at the Nil rate or lower rate shall be granted unless the application under that section includes the applicant’s Permanent Account Number (PAN).