Income Tax Law • TDS Guide • Updated October 2026
Section 194B: TDS on Lottery, Crossword Puzzle and Game Winnings
A practical guide to deduction of tax on prize winnings, the Rs. 10,000 threshold, the 30% rate, non-cash prizes and the corresponding provisions of the Income-tax Act, 2025.
What is Section 194B?
Section 194B of the Income-tax Act, 1961 deals with tax deducted at source (TDS) when a person pays winnings from a lottery, crossword puzzle, card game, other games, gambling or betting. It makes the payer responsible for withholding tax at the prescribed rate before making a covered payment. It is a collection provision; the separate charging rules determine the winner's final income-tax liability.
The Income-tax Act, 2025 applies from 1 April 2026, subject to transitional and savings provisions. For transactions governed by that Act, the corresponding withholding provision is section 393(3), Table for payments to any person, serial number 1. The separate provision for online games is serial number 2.
Section 194B of the Income-tax Act, 1961: Meaning and scope
Who must deduct tax?
The person responsible for paying covered winnings is the deductor. The provision can apply to a company, promoter, organiser or other person making the payment. The recipient may be an individual or another person; the statutory text is not restricted to salaried taxpayers.
Which winnings are covered?
Lottery winnings, crossword-puzzle prizes, card-game winnings, winnings from other games of any sort and winnings from gambling or betting fall within the described categories. The Finance Act, 2023 expressly brought gambling and betting within the wording and separately excluded online games from section 194B for the period from 1 April 2023, because those games have their own withholding regime under section 194BA.
Threshold and changes over time
The original page referred to an older Rs. 10,000 per-prize test. The Finance Act, 2023 introduced an aggregate Rs. 10,000 during the financial year formulation. The applicable text has since been amended, and the 2025 Act expressly uses Rs. 10,000 in a single transaction. For older transactions, check the wording and effective date applicable when the prize was paid rather than applying the latest threshold retrospectively.
What is the tax rate?
For ordinary covered winnings, the prescribed withholding rate is generally 30%. The corresponding special income-tax rate on such winnings is also 30%, subject to applicable statutory additions and the taxpayer's circumstances. The normal basic exemption limit does not automatically eliminate withholding under this provision.
Income-tax Act, 2025: Applicable law from 1 April 2026
Under section 393(3), Table for payments to any person, serial number 1, withholding covers winnings (other than specified online games) from lotteries, crossword puzzles, card games and other games, gambling or betting. The statutory table identifies any person as the payer, provides rates in force and sets a Rs. 10,000 threshold for a single transaction. The Income Tax Department's rate schedule identifies the TDS rate as 30% for tax year 2026-27.
Section 194(1), Table serial number 1, of the 2025 Act separately specifies the 30% special income-tax rate for these winnings. This is distinct from section 194 of the 1961 Act, which concerns dividend TDS; identical section numbers across the two Acts should not be confused.
Online games are treated separately
For online games, the former section 194BA and the new section 393(3), Table serial number 2 deal with withholding on net winnings under the relevant prescribed computation rules. The Rs. 10,000 single-transaction threshold for other games should not be assumed to apply to online-game net winnings.
Winnings wholly or partly in kind
Prizes can include a vehicle, electronic goods, travel package or another non-cash benefit. Where winnings are wholly in kind, or partly in cash and partly in kind and the cash is insufficient to meet the tax, the payer must ensure that the applicable tax has been paid before releasing the prize. The organiser should determine the proper taxable value, document the calculation and retain evidence of payment or withholding.
A prize described as "tax-free" in promotional material does not, by itself, remove the organiser's statutory obligations. The arrangement for who bears the tax may affect the calculation and should be reviewed carefully.
Illustrative TDS calculations
| Scenario under the 2025 Act | Indicative treatment |
|---|---|
| One lottery prize of Rs. 8,000 | Below the Rs. 10,000 single-transaction threshold; no TDS under the specified table entry, although taxability is a separate question. |
| One crossword prize of Rs. 50,000 | Indicative basic TDS: Rs. 15,000 at 30%, before any additional amount required by law. |
| One non-cash prize valued at Rs. 1,00,000 | Indicative basic tax: Rs. 30,000; payer must ensure tax is paid before releasing the prize. |
| Online-game net winnings of Rs. 20,000 | Apply the separate online-games provision and prescribed net-winnings calculation, not the ordinary lottery threshold. |
Examples are simplified for illustration and do not account for surcharge, cess, valuation disputes, tax borne by organisers or other case-specific rules.
Compliance checklist for organisers and winners
- Identify the category: Distinguish lottery, crossword, card game, betting and online-game winnings.
- Check the relevant period: Apply the 1961 Act or 2025 Act and the threshold applicable to the transaction date.
- Verify identity and PAN: Obtain required tax particulars and consider applicable higher-deduction rules.
- Calculate and deduct: Withhold at the prescribed rate when making a covered payment.
- Handle prizes in kind: Ensure the tax obligation is discharged before delivery.
- Deposit and report: Follow the applicable TDS payment, return and certificate requirements and reconcile the credit in the recipient's tax records.
- Report winnings: Winners should consider the applicable special tax provisions when preparing their return.
Frequently asked questions
Is TDS deducted on lottery winnings above Rs. 10,000?
For transactions governed by the 2025 Act, the relevant table specifies a Rs. 10,000 threshold in a single transaction. The payer generally deducts at 30% when the threshold is exceeded. Historical thresholds may differ.
Does Section 194B cover online games?
Not under the post-April 2023 regime of the 1961 Act. Online games have separate TDS rules under section 194BA, carried into section 393(3), Table serial number 2, of the 2025 Act.
What happens if a prize is a car or another non-cash item?
The payer must ensure that tax has been paid before handing over the prize if the prize is wholly in kind or cash is insufficient to cover the required tax.
Is the Rs. 10,000 limit an income-tax exemption?
No. It is a threshold for the specified withholding requirement, not a general exemption from income tax on winnings.
Official law and further reading
- Income Tax Department: Section 194B of the Income-tax Act, 1961
- Income Tax Department: Section 194BA, online games
- Income Tax Department: Section 393 of the Income-tax Act, 2025
- Official Income-tax Act, 2025 (PDF)
- Income Tax Department: TDS rate schedule for tax year 2026-27
This article provides general information. Statutory amendments, notifications and facts of an individual case govern the final treatment.