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

Save Tax With Mutual Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300       Mutual funds are ideal as long term investment avenues for retail investors. To encourage investments in this avenue, the Government of India offers investors a spate of tax benefits thus ensuring maximum benefit from mutual funds held beyond a year. Sample some of the key benefits and refer to the table for a detailed list of tax rates for different types of schemes ·        Avail deductions under Sec 80C of the Income Tax Act by investing up to a maximum of Rs. 1 lakh in designated Equity Linked Savings Schemes (ELSS). Such investments have a compulsory lock in period of 3 years. ·        First time retail investors in equity with a gross total income of up to Rs. 12 lakh can invest up to Rs. 50,000 in specific MF schemes un...

How much to invest in gold ?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) Let your motivation dictate the share of the yellow metal in your portfolio Enough has been said and written about gold as an investment option. The latest argument is that the craze for gold among Indian households is endangering our country's balance of payments. The policymakers are busy trying to find ways of discouraging investment in gold, but if households keep the common good in mind, they would be paying the market price for gas cylinders as they do for, say, their mobile phone bills. After all, private decisions are driven by private motives. So, how should a household look at gold from its own perspective? Gold is primarily acquired for its merit as a store of value. Even if the worst crisis hits a family, the gold that it holds could be put to use anywhere in th...

LIC's JEEVAN SHIKHAR

  LIC's Jeevan Shikhar is a participating, non-linked, saving cum protection single premium plan wherein the risk cover is ten times of Tabular Single Premium. The proposer will have an option to choose the Maturity Sum Assured. The premium payable shall depend on the chosen amount of Maturity Sum Assured and age at entry of the life assured. This plan also takes care of liquidity need through its loan facility. The plan will be open for sale for a maximum period of 120 days from the date of launch. 1.   BENEFITS   : a) Death Benefit: On death during first five policy years: Before the date of commencement of risk   :   Refund of Single Premium without interest. Single Premium mentioned above shall not include any extra amount if charged under the policy due to underwriting decision and taxes. After the date of commencement of risk   : "Sum Assured on Death" equal to 10 times the tabular single premium shall be payable. On death after completion of five policy years but b...

Investment Strategy - What is Sector Rotation Theory?

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)   The economy goes through cycles : it expands for a few years and then contracts. Study of historical data suggests that different sectors tend to perform well on the stock markets during different stages of the economic cycle. While history never repeats itself exactly, some broad patterns tend to recur. Investors can take advantage of the sector rotation theory to move their money from those sectors that have seen their best times to those that are likely to do well in future.   The person who developed the sector rotation theory is Sam Stovall, chief investment strategist at Standard & Poor's. He developed this theory by studying data on economic cycles going as far back as 1854 provided by the National Bureau of Economic Research ( NBER ) of the US.   When trying to correlate stock-market perfor...

Rajiv Gandhi Equity Savings Scheme (RGESS) set for launch this week

The finance ministry is set to notify the Rajiv Gandhi Equity Savings Scheme ( RGESS ) this week.   Though Finance Minister PChidambaram had approved on September 21, the scheme announced in this year's Budget, and had said that the revenue department will notify the scheme and the Securities and Exchange Board of India ( Sebi ) would issue relevant circulars within two weeks, it is yet to become operational.   A senior finance ministry official said the revenue department was expected to notify the scheme any day now to attract retail investors to the equity segment.   He added that Sebi was not required to issue any circular for the operationalisation of the scheme and that after the issuance of the revenue department's notification, investors would be able to avail of the benefits of the scheme.   The official accepted that implementation of the scheme had been delayed due to the deliberations on inclusion of mutual funds ( MF ) in it.   ...
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