TaxTMI 
TaxTMI 
Scope, Compliance, and Implications of TDS on Gaming and Lottery Winnings : Clause 393(3)[Table: S.No.1] of Income Tax Bill, 2025 Vs. Section 194B of the Income-tax Act, 1961
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....securing timely revenue for the exchequer and preventing tax evasion. The legislative approach to taxing such winnings has evolved to address new forms of games (including online games), changes in payment patterns, and to plug loopholes in the earlier regime. This commentary provides a structured, in-depth analysis of Clause 393(3)[Table: S.No.1] of the Income Tax Bill, 2025, focusing on its objectives, detailed provisions, practical implications, and a comparative analysis with Section 194B of the Income-tax Act, 1961. The analysis also highlights significant changes and their likely impact on taxpayers, payers, and the tax administration. Objective and Purpose The primary objective of both Clause 393(3)[Table: S.No.1] and Section 194B ....
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....such winnings. There is no restriction on the nature of the payer; it could be an individual, company, partnership firm, or any other entity. 3. Rate of Deduction and Threshold * Rate: At "rates in force," which typically refers to the rate specified under the Finance Act for the relevant assessment year (historically 30% plus applicable surcharge and cess). * Threshold: Tax is to be deducted if the winnings in respect of a single transaction exceed Rs. 10,000. The threshold is transaction-based, not aggregate-based, marking a significant shift from the earlier approach (discussed below). 4. Timing and Mode of Deduction * Tax is to be deducted at the time of payment, whether in cash, by cheque, draft, or any other mode. * No ded....
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.... payments or aggregation in cases of cumulative winnings. Practical Implications For Payers * Need to identify and track winnings exceeding Rs. 10,000 per transaction. * Ensure deduction of tax at source at the correct rate, irrespective of the mode of payment. * In case of prizes in kind, ensure that tax has been paid before release, which may require collecting tax from the winner or grossing up the prize value. * Maintain detailed records and comply with TDS reporting obligations. For Recipients * Net winnings received are after deduction of TDS; recipient is entitled to credit for the tax deducted. * Where winnings are wholly in kind, recipient may need to arrange for payment of tax before receiving the prize. * Disclos....
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....st ensure tax is paid before releasing winnings if wholly or partly in kind. Payer must ensure tax is paid before releasing winnings if wholly or partly in kind. 2. Key Legislative Changes Reflected in Both Provisions * Threshold Calculation: Both provisions now operate on a "single transaction" basis rather than aggregate winnings in a financial year. This change, effective from 1 April 2025, addresses earlier avoidance where winnings were split to stay below the threshold. * Exclusion of Online Gaming: There is a clear legislative intent to treat online gaming separately, recognizing its unique nature, payment flows, and potential for frequent, micro-transactions. * Winnings in Kind: Both provisions require the payer to ensure ta....
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....Table: S.No.1] aligns with the new regulatory focus on digital gaming, which is now subject to its own TDS regime. * Reporting requirements are harmonized with the broader TDS framework. Comparative Table: Key Features Feature Clause 393(3)[Table: S.No.1] of the Income Tax Bill, 2025 Section 194B of the Income-tax Act, 1961 Scope Winnings from lottery, crossword puzzle, card game, other games, gambling, betting (excluding online games). Winnings from lottery, crossword puzzle, card game, other games, gambling, betting (excluding online games). Threshold Rs. 10,000 per single transaction Rs. 10,000 per single transaction (changed from aggregate per FY to single transaction w.e.f. 1-4-2025) Rate Rates in force (typica....