Costing and Taxation · Ch 3 — Income from Other Sources
Winnings from Lotteries, Horse Races, Card Games and Crossword Puzzles
3.3
Winnings from Lotteries, Horse Races, Card Games and Crossword Puzzles
Section 56(2)(ib) specifically brings 'winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort, or gambling or betting of any form or nature whatsoever' into this Head. This particular category of income is treated very differently from every other income studied so far in this course.
Note
The special rules for winnings — Section 56(2)(ib), read with Section 115BB
- Winnings are taxed at a special flat rate of 30% (plus applicable surcharge and health-and-education cess), regardless of the assessee's own income level or slab — even a person with no other taxable income at all pays 30% on a lottery win.
- No deduction of any expenditure or allowance is permitted against winnings — not even the cost of the lottery ticket purchased, or an entry fee paid for a competition.
- The basic exemption limit does NOT apply to winnings — an assessee cannot set the tax-free slab off against this income; the full amount is taxed at 30% from the very first rupee.
- Winnings are subject to Tax Deducted at Source (TDS) before payment reaches the winner — the payer deducts TDS at 30% [Section 194B for lotteries/games, Section 194BB for horse races] wherever a single winning payment exceeds a prescribed threshold.
Note
AY 2026-27 grounding — winnings …
Definition 1Winnings [Section 56(2)(ib)]
Winnings from lotteries, crossword puzzles, races (including horse races), card games, and other games/gambling/betting — taxed at a flat 30% special rate, with no deduction and no …