Section 194G: TDS on Lottery Ticket Commission, Rate and Threshold
Section 194G of the Income-tax Act, 1961 dealt with tax deduction at source on commission, remuneration or prize connected with stocking, distributing, purchasing or selling lottery tickets. For payments governed by the Income-tax Act, 2025, the corresponding rule is in section 393(3), Table serial number 4.
Meaning and scope of Section 194G
The provision covered a person responsible for paying income to someone who is, or has been, engaged in stocking, distributing, purchasing or selling lottery tickets. The covered income could be described as commission, remuneration or prize, irrespective of the label used. It addressed earnings arising from lottery ticket distribution and sales arrangements, rather than simply every payment associated with a lottery.
The word commission commonly refers to compensation for selling or distributing tickets. Remuneration covers other rewards for such activity. A prize under this provision is one paid in connection with the specified lottery ticket trade; tax on a lottery winner's winnings is a separate subject and should not be confused with this rule.
TDS rate, threshold and time of deduction
| Requirement | Position |
|---|---|
| Rate | 2% of covered income, subject to any other applicable TDS provisions |
| Threshold | Rs. 20,000; the statutory test is whether the relevant amount exceeds the threshold |
| Person deducting | Person responsible for paying the specified lottery ticket commission, remuneration or prize |
| Timing | At credit to the payee's account or actual payment, whichever occurs first |
| Suspense account | Crediting income to a suspense account or similarly named account does not defer deduction under the historical Section 194G explanation |
The 2% rate became effective on 1 October 2024, replacing 5%. The threshold increased from Rs. 15,000 to Rs. 20,000 from 1 April 2025. For periods before these amendments, the rate and threshold applicable to that period must be checked separately.
Corresponding provision under the Income-tax Act, 2025
From 1 April 2026, the Income-tax Act, 2025 governs the corresponding TDS requirement. Section 393(3), Table serial number 4 covers 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 on those tickets. It specifies a 2% rate and Rs. 20,000 threshold.
The earlier Section 194G remains relevant when examining tax deduction obligations, defaults and other matters relating to periods governed by the Income-tax Act, 1961. The change in statutory numbering does not by itself erase historical liabilities.
Practical illustration
Suppose a lottery ticket distributor is credited Rs. 30,000 as qualifying commission during a relevant period and no special exception changes the deduction. At 2%, the payer deducts Rs. 600 as TDS, and the amount payable after that deduction is Rs. 29,400. If the applicable amount does not exceed Rs. 20,000, deduction under this particular threshold-based provision is not triggered.
The payer should maintain records of the commission arrangement, credit and payment dates, PAN information, tax deduction and deposit, and applicable TDS reporting. Other provisions can affect the actual rate or compliance procedure in specific cases.
Legislative history and amendments
| Effective date | Change |
|---|---|
| 1 October 1991 | Section 194G introduced by the Finance (No. 2) Act, 1991 |
| 1 June 1992 | Historical renumbering and additional subsections introduced |
| 1 June 2003 | Subsections (2) and (3) omitted |
| 1 June 2016 | Rate reduced from 10% to 5%; threshold raised from Rs. 1,000 to Rs. 15,000 |
| 1 October 2024 | Rate reduced from 5% to 2% |
| 1 April 2025 | Threshold raised from Rs. 15,000 to Rs. 20,000 |
| 1 April 2026 | Corresponding rule operates under Section 393(3), Table serial number 4, of the Income-tax Act, 2025 |
Frequently asked questions
What is the TDS rate on lottery ticket sales commission?
The specified rate is 2%, subject to other applicable provisions.
What is the threshold for TDS on lottery commission?
Rs. 20,000. The relevant income must exceed this threshold for the provision to apply.
Is TDS deducted when commission is credited but not paid?
Yes. The deduction point is generally the earlier of credit or payment, including a credit to a suspense account under the historical rule.
Is Section 194G the same as tax on lottery winnings?
No. Section 194G relates to income for stocking, distributing, purchasing or selling lottery tickets. Winnings received by a lottery winner are treated separately.
What replaces Section 194G from April 2026?
Section 393(3), Table serial number 4, of the Income-tax Act, 2025.
Official statutory references
- Income Tax Department: Section 194G of the Income-tax Act, 1961
- Income Tax Department: Section 393 of the Income-tax Act, 2025
- Income Tax Department: Section correspondence navigator
- Income Tax Department: TDS rates reference
Updated: 27 October 2026. This article provides general statutory information. Apply the law relevant to the tax year and circumstances of each payment.