TDS WHERE WINNINGS ARE PARTLY IN CASH AND PARTLY IN KIND

   
 

The law as amended with effect from 1st June' 1997 states that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings.
Hence prizes won in various tele-serials, gaming contests or lucky draws and such other similar sales promotion activities will attract provisions of Tax deduction at source under this Section.
Let's go through a simple yet unique example as to how to determine the monetary value of such part cash and part kind winnings for deduction of TDS purpose:

  • Mr. Happy has just won a Brand new Honda Civic in a "Badshaah Kaun" contest held on Zee TV. The market price of the car is Rs. 10, 00,000. However the organizers of the contest are not able to arrive at the figures of Tax deduction to be done at source on such monetary value of the car. You as a renowned tax consultant are approached for same. Determine the amount of TDS deductible.
     

  • In this case the net consideration after deduction of TDS should amount to Rs. 10,00,000. So you have to determine the Gross amount on which TDS should be deducted in such a way that the net consideration in the hands of Mr. happy comes to Rs. 10,00,000 which goes as under:

    Rate of TDS applicable is 30% 

    So the Gross amount will be equal to 10,00,000 × 100 ÷ (100 - 30.00), i.e. Rs.14,28,571/-

    Therefore TDS will be 30.00% of Rs. Rs.14,28,571/- which equals to Rs. 4,28,571/-

    Conclusion: Hence the organizers of the contest should deposit Rs. 4,47,178/- as TDS with the Govt. and Gross income of Mr. Happy shall be construed as Rs. 14,28,571/-

    PLEASE NOTE:

    · The rates of Surcharge so applicable are as under: (Surcharge to be applied till 30.09.2009 from 01.10.2009 onwards no surcharge to be applied for deduction of TDS is concern.

    The rates of Surcharge before 01.10.2009, applicable are as under:

    •
Payee being Individual, HUF, AOP, BOI, whether incorporated or not; 10% of such tax where the income or the aggregate of such income paid or likely to be paid and subject to the deduction exceeds Rs. 10,00,000.
Payee being Co-operative Society NIL
Payee being a Firm or a Company 10% of such tax where the income or the aggregate of such income paid or likely to be paid and subject to the deduction exceeds Rs. 1,00,00,000.
Payee being Artificial Juridical Person. 10% of such tax.
 

  • If out if winning amount of lottery etc. any bonus, commission, is paid or payable to lottery agents or sellers of lottery tickets, or sales made by them, then no income tax is to be deducted for that amount of paid and tax will be therefore be deducted after deducting such bonus and commission. 

  • No TDS on prize on unsold tickets in possession agent/ trader in respect of prizes on unsold/ unclaimed lottery tickets in possession of the agent/ trader is income from business and does not constitute winnings from lotteries and hence not subject to TDS. [Director of State Lotteries vs. CIT]