Skip to main content

Tac Planning: The Prize Money is Taxable

THE festive season has just gone by – first, it was Diwali, followed by Christmas and then New Year. Several organisations launch lotteries and similar other schemes during this time to attract consumers. The prizes vary from a few thousand rupees of cash awards to expensive pens, watches and cars. Many people have enquired whether the winnings received in cash or kind have any tax angle for the recipient or the payer/sponsor of such scheme.


   It is pertinent to note that according to the provisions of the Income-Tax Act, 1961, where the total income of a taxpayer includes any income by way of race (other than the income from the activity of owning and maintaining race horses) or card game and other games of any sort or from gambling or betting, the same shall be taxable at the rate of 30%. Therefore, if the taxpayer receives any such award/winnings, then such winnings will be liable to tax as part of his total income for a particular tax year.


   An issue arises, whether a particular scheme is in the nature of a lottery or not. In this context, one can refer to judicial precedents wherein following key factors have been considered to constitute it as a lottery scheme. These inter-alia include where the prize is given as part of the overall scheme or some other advantage is given in the nature of a prize, the prize is distributed by chance and where some consideration is paid or promised for purchasing such chance.


   In this context, it is also important to note that the person responsible for paying to any person any income by way of winnings from any lottery or cross word puzzle for an amount exceeding 10,000 is required to deduct income-tax thereon at the rates in force, currently being 30%, at the time of payment of such money. Thus, the payer is also responsible to deduct tax at source before giving the prize/award.


   A question arises where winnings are not exclusively in cash but are either in kind or are in a combination of cash and kind then— whether the tax is required to be withheld even in those cases. The answer to this again is in the affirmative. Thus, in a case where the winnings are wholly in kind or partly in cash and partly in kind but the cash portion of such winnings is not sufficient to meet the liability of tax deduction in respect of whole of the winnings, then the person responsible for paying such winnings has to ensure that the tax has been paid in respect of the same, before releasing the winnings. Therefore, an obligation has been cast on the payer, irrespective of whether the winnings are in cash or in kind to ensure that the tax is deducted/duly paid before the winnings are released in cash or in kind.



 

Popular posts from this blog

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis

Impact of Demonetisation

The government's move to demonetise `500 and `1,000 currency notes will immediately impact reserve money and money supply in the system along with the balance sheet of the Reserve Bank of India, the sole authority in the country for accepting currency notes and coins as legal tender. ET explains the interplay of currency, reserve money and money supply. 1. What is currency in circulation? It is the total value of currency (coins and paper currency) that has ever been issued by the central bank minus the amount that has been withdrawn by it. Currency in circulation comprises currency notes and coins with the public and cash in hand with banks. It is a major liability component of a central bank's balance sheet. 2. What is reserve money? It is essentially the central bank's money . It is also called high-powered money , base money and central bank money . As per the definition, reserve money equals currency in circulation plus bankers' deposits

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now