TaxTMI 
TaxTMI 
Unifying TDS on Lottery-Related Payments : Clause 393(3)[Table: S.No. 4] of the Income Tax Bill, 2025 Vs. Section 194G of the Income-tax Act, 1961
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....purchase, or sale of lottery tickets, by way of commission, remuneration, or prize. This provision is the proposed legislative successor to Section 194G of the Income-tax Act, 1961. Section 194G, as it stands in the Income-tax Act, 1961, is a long-standing provision that has regulated TDS on commission and related payments in the lottery business since its introduction in 1991. Over the years, Section 194G has undergone amendments, particularly in threshold limits and rates, to adapt to evolving economic and administrative considerations. The present commentary provides a detailed clause-wise analysis of Clause 393(3)[Table: S.No. 4] of the Income Tax Bill, 2025, explores its legislative intent, practical implications, and challenges, and u....
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....Tax Bill, 2025, provides a tabular framework for TDS on payments to any person. Table S.No. 4 reads as follows: Any income, credited or paid to a person, who is or has been stocking, distributing, purchasing or selling lottery tickets, by way of commission, remuneration or prize (by whatever name called) on such tickets. * Payer: Any person. * Rate: 2%. * Threshold Limit: Rs. 20,000. The provision requires "any person" responsible for making such payments to deduct tax at the specified rate if the payment or aggregate payments exceed Rs. 20,000 in a tax year. 3.2. Key Elements * Nature of Payment: The provision covers income "by way of commission, remuneration or prize (by whatever name called)" paid to persons involved in t....
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....in, no TDS is required on income in respect of units referred to in section 393(1)[Table: S.No. 4(i)]. However, this does not directly impact the lottery commission provision, which is not in the nature of capital gain. 3.5. Compliance and Procedural Aspects The deductor is required to: * Deduct tax at the time of payment or credit, whichever is earlier. * Deposit the TDS with the government within the prescribed time. * Issue TDS certificates to the deductee. * File periodic TDS returns as prescribed. Non-compliance attracts interest, penalty, and potential disallowance of the expenditure under the Income Tax Act. 3.6. Ambiguities and Issues * Aggregation Rule: The provision refers to "aggregate of amounts," but does not....
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.... equivalent). * Reconciliation of payments to ensure correct credit of TDS to the deductee. 4.3. Procedural Safeguards The provision, by requiring TDS at the earliest of payment or credit, closes loopholes relating to deferment. The deeming fiction for credits to suspense accounts further strengthens the safeguard. 4.4. Relief for Small Agents The threshold of Rs. 20,000 is intended to exclude small-time agents or occasional participants from the compliance net, focusing enforcement on significant players. 5. Comparative Analysis with Section 194G of the Income-tax Act, 1961 5.1. Textual Comparison Feature Clause 393(3)[Table: S.No. 4] of the Income Tax Bill, 2025 Section 194G of the Income-tax Act, 1961 Applicability Any ....
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....rnization: Clause 393(3) is part of a consolidated TDS framework, with uniform structure and language, and cross-references to general anti-avoidance and compliance provisions. Section 194G, being a stand-alone provision, had its own machinery clauses. * Certificates for Lower/Nil Deduction: Section 194G originally allowed for lower or nil deduction certificates from the Assessing Officer (sub-sections (2) and (3)), but these were omitted by Finance Act, 2003. The 2025 Bill does not specifically provide for such certificates in the lottery context, but general provisions for declarations or certificates under the new TDS regime may be applicable. * Legislative Clarity and Simplicity: The 2025 Bill adopts a clearer ta....
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....ion from multiple payers. 6. Comparative Analysis with Other Jurisdictions While most countries tax lottery winnings and related commissions, the Indian scheme of TDS on commission is relatively unique in its detail and enforcement. Some jurisdictions tax only the winnings, not the commission paid to intermediaries. The Indian approach reflects the importance and scale of the lottery business in the country, and the need to ensure tax compliance at all levels of the distribution chain. 7. Conclusion Clause 393(3)[Table: S.No. 4] of the Income Tax Bill, 2025, represents a logical evolution of Section 194G, preserving its essential features while embedding it in a modernized, consolidated TDS framework. The harmonization of threshold and ....